Slow 1H22 But Operating Costs Likely to Peak

• ComfortDelGro (SGX:C52)’s 2Q22 core EBIT of S$62.4m (-3.4% q-o-q, +156.8% y-o-y) was slightly below expectations due to higher operating expenses. Excluding the non-recurring items, 1H22 underlying earnings of S$88.2m formed about 47% and 45% of MIBG and consensus full year estimates respectively.
• While fuel prices likely peaked in 2Q, we trim our FY22-24E earnings per share (EPS) forecast for ComfortDelGro marginally to take into account the adverse FX impacts and taxi rental waivers granted in China.

SG Public Transport Services the Key Growth Driver

• 1H22 revenue rose 6.7% y-o-y to S$1.86b, driven by its Public Transport Services Business (+8.1% y-o-y) at S$1.49b on improved rail ridership and fuel indexation in Singapore. ComfortDelGro’s 50% JV, Auckland One Rail, made its maiden contribution for the half year. Notably, core EBIT (excluding disposal and government relief) surged 126% y-o-y to S$76.6m on better operating leverage.
• On a geographical basis, ComfortDelGro’s overseas contribution dipped 3.9ppt to 42.6%, partly due to unfavourable foreign currency translation from weaker AUD and GBP.

Taxi Core EBIT Continues to Recover H-o-H

• Taxi revenue fell by 6.5% to S$211.3m in 1H22 given the various lockdowns in China and the absence of contributions from the London and Ho Chi Minh taxi businesses following their divestments in Jul 2021 and Mar 2022. But core Taxi EBIT of S$19.7m (+447% h-o-h, 77% y-o-y) is encouraging along with higher turnover from the Singapore Taxi business which benefitted from higher bookings after the relaxation of COVID restrictions.
• According to ComfortDelGro's management, its taxi and PHV fleet size is gradually increasing as driver earnings are expected to remain healthy.

Returning Excess Cash; First Special Dividend in 15 Years

• ComfortDelGro is currently sitting on a strong net cash position of S$603m with stable free cashflow. Accordingly, it declared an interim dividend of 2.85 cents (or 70% of underlying profits) and a special dividend of 1.41 cents (the full exceptional gain from sale of its Alperton property in London).

• We believe ComfortDelGro will continue to return excess cash to shareholders even as it looks for growth opportunities overseas and in adjacent settings.

Source: Maybank Research - 14 Aug 2022