• 0.6% rise in FY18 net profit
• Waiting for ridership to rise for DTL
• 10.5 S cts div for 2018

Results Within Expectations

ComfortDelGro (CDG) reported a 6.4% rise in revenue to S$3.8b and a 0.6% increase in net profit to S$303.3m in FY18, 2% higher than our full year forecast. The increase in revenue came mainly from the public transport services (bus, rail) business offset by decreases in the taxi and automotive engineering segments. New acquisitions in late 2017 and 2018 helped boost the topline, accounting for S$124.2m, or 54.3%, of the revenue increase.

Operating profit increased by 7.2% to S$438.8m from a stronger showing in the public transport services business and the inspection and testing segment. Contribution from newly acquired businesses amounted to S$20.7m or two-thirds of the growth in operating profit in 2018.

2018 – Year of Acquisitions

Management described 2018 as a “watershed” year for the group, marked by its most aggressive expansion programme yet. ComfortDelgro invested S$439.4m overseas alone, and the bulk was in Australia, where it also broadened its operations to include Queensland and the Northern Territory. Looking ahead, the group will continue to look at investment opportunities and new technological initiatives.

Continues to be Dragged by DTL

Breaking down by business divisions, the group expects its revenue from both the Singapore and Australia public transport services segments to increase, while UK’s performance is likely to maintain the same. The expectation for the taxi, automotive engineering and other divisions is also similar (i.e. maintain).

Car rental and leasing is the only segment that the group expects a decrease in revenue going forward. Meanwhile, the rail business continues to be dragged by the Downtown Line, while the Northeast Line is profitable.

Slightly Higher Dividend

A final dividend of 6.15 cents has been proposed, vs. 6.05 cents a year ago. Together with the interim dividend of 4.35 cents paid earlier, the total dividend for 2018 is 10.5 cents, compared to 10.4 cents in 2017.

The payout ratio remains at about 75%. We fine tune our estimates and our FV rises slightly from S$2.29 to S$2.38.

Source: OCBC Research - 14 Feb 2019