• ComfortDelGro announced 40% taxi rental rebate till 15 Aug 2020, down from 50%.
• Gradual cut back in rebates not a surprise.
• Expect ComfortDelGro's 1H20 results to be very weak with no interim dividend.
• Trading at -2SD P/B, negatives are priced in.

What’s New

Granting 40 % rental rebate to Singapore taxi hirers till 15 Aug.

• ComfortDelGro (SGX:C52) announced to its taxi hirers in Singapore last evening that it will give a 40% rental rebate off its daily rental rate from 16 July till 15 August. This includes the S$10/day rebate provided under the Government Special Relief Fund announced earlier in Feb.
• Various rental waivers and rebates have been provided to taxi hirers since the start of the COVID-19 pandemic, but the latest announcement is a slight step down from the 50% rebate given since the end of the Circuit Breaker (CB) period in Singapore (from 2 June). Since 2 June, a 50% rebate was provided for month of June, and extended for another 2 weeks till 15 July.

Our Views

• This is largely in line with our earlier views that rental rebates are likely to taper as the reopening gains pace and normality reverts. We have already assumed in our earnings estimates that rental rebates will last till Sep. We have penciled in $120m including the full rental waivers for the months of April and May, and rebates prior and after.

What to Look Out for Going Forward?

1H20 results to be in dire straits, slipping into a net loss position.

• As per its profit guidance announced on 26 Jun, ComfortDelGro indicated that it would slip into losses for 1H20, given the operational impact from COVID-19, coupled with impairment on its investments. We are not surprised by the impact on operations, though we are unable to estimate the impairment charge at this juncture.

Interim dividend not likely.

• ComfortDelGro has traditionally paid an interim dividend, but with the impact from COVID-19 pandemic on its operations, we expect this to be absent in the upcoming results.

Negatives Priced in at -2SD P/B; on Track for Recovery; Worst Is Behind Us

• We maintain our view that the worst is over, and a gradual recovery seems on track. ComfortDelGro's share price has retraced towards the price when we upgraded the stock to BUY, and the recent weakness is a buying opportunity.
• We believe its current valuation of 1.2x P/B at -2SD of its historical average should have priced in the negatives and provides support.

Source: DBS Research - 15 Jul 2020