• FY16 PATMI within expectations
• Average taxi fleet idle rate at 1.4% for FY16
• Solid balance sheet

FY16 revenue lower on unfavourable FX translation

ComfortDelGro’s (CDG) FY16 PATMI came in within expectations as it grew a steady 5.0% to S$317.1m, and met 98.3% of our FY16 forecast. FY16 revenue fell 1.3% to S$4.1b, mainly eroded by weaker GBP against SGD. Without foreign currency (FX) effect, underlying revenue actually grew 1.7%, mainly driven by the public transport services (bus and rail), taxi, and driving centre segments, but partly offset by automotive engineering services business on lower selling prices and lower volume of diesel sold to taxi drivers as a result of decline in mileage driven by the drivers.

FY16 operating expenses fell 1.7% YoY to S$3.6b, mainly due to positive FX effect from weaker GBP against SGD. If not for the FX impact, operating costs would have increased 1.3%, mainly driven by higher staff costs and repairs and maintenance costs. CDG also raised its FY16 dividend to 10.3 S-cents (FY15: 9.0 Scents).

Focus on retaining existing taxi hirers

For FY17, as CDG continues to prepare for DTL3, we expect related staff costs to gradually increase on a YoY basis. One of CDG’s key focuses for FY17 is to retain existing taxi hirers, and keep taxi fleet idle rate low. As highlighted in our previous report dated 4 Jan 17, CDG has been pushing out several forms of revenue and risk sharing scheme to hirers to retain them. In addition, management has also stated they will review and may intentionally slow down taxi fleet renewal programme.

The reason is because given the current competitive landscape, CDG’s existing hirers prefer not to upgrade to a newer model where rental costs will be higher. And by stretching the older model taxi fleet to the maximum regulatory lifespan of eight years, they are able to retain existing hirers by not increasing the rates as a result of fleet renewal.

Reiterate BUY

With in-line results, and as we introduce FY18 forecasts, our FV remains unchanged at S$2.95. Reiterate BUY, supported by a 4.4% FY17F dividend yield. As CDG receives cash from the sale of bus assets to LTA, we expect dividend payout to continue its progressive increase over time, or be used for overseas expansion.

Source: OCBC Research - 13 Feb 2017