ComfortDelGro's 1H21 PATMI in Line With Estimates; Maintain BUY

• ComfortDelGro (SGX:C52)'s 1H21 revenue/ EBIT/ PATMI met MKE/ consensus estimates as a result of positive operating leverage. On a sequential basis, the taxi business’ EBIT losses was contained at S$1m despite 35-50% rental rebate given to its drivers. That said, reopening prospects of Singapore remain bright, in our view. Management of the COVID-19 situation is becoming clearer in key operating countries as compared to last year.
• Our P&L forecasts are unchanged and we maintain BUY with DCF-based (WACC: 8.2%, LTG: 1%)) target price of S$1.88 for ComfortDelGro.
• We continue to like ComfortDelGro as it offers exposure to domestic transport recovery. In the near term, re-catalyst could come from the unlocking of value of its Australian assets, which ComfortDelGro is likely to give some updates over the next few weeks.

Positive Operating Leverage Kicking in

• ComfortDelGro's 1H21 PATMI of S$91m (vs 1H20: S$6.6m net loss) came in at 50/49% of MKE/ consensus estimate. Revenue was S$1.7b (+14% y-o-y) due to less severe interim dividend and S$0.021 has been declared. This translates to a dividend payout ratio of 50%.

Taxi Segment Minimally Hit by Higher Rental Rebates

• On a sequential basis, the decline in ComfortDelGro's EBIT (-34%) was attributable to:
  1. public transport (-14% q-o-q to S$38.2m) as ridership continued to be at 65% of pre-COVID levels; and
  2. taxi unit returning to operating losses of S$1m (1Q21: S$18.6m profit) on the back of 35-50% rental rebates in Singapore.
• Additionally, automotive engineering was weaker (-13% to S$2.6m), while testing services remained flat at S$7.6m. That said, its balance sheet remained strong with net cash position of S$417m (vs S$191m in FY20) and free cashflow reaching S$207m in 1H21.

Recovery at a Slower Pace

• ComfortDelGro's management sees activity levels are believe ComfortDelGro's 2H21 earnings are likely to improve.

Source: Maybank Kim Eng Research - 15 Aug 2021