2Q12  results  in-line  with  our  expectations.  ComfortDelGro's  (CD)  2Q12 PATMI came in within our expectations at S$65m (+22% QoQ, +9% YoY) on the back of higher revenue of S$885m (+3% QoQ; +5% YoY) with operating margins down 0.2ppt  YoY to 12.0% (1Q12  EBIT margin: 10.9%). 2Q12  PATMI  made  up 25.3% of our full year estimate. We raise our FY12/13 earnings estimates by 2%. We continue  to favour  CD who has displayed  strength in its overseas business. With  recent  acquisition  of  Deanes  Transit  Group  in  Australia,  and  factoring further overseas  growth potential,  we  raise  our  long term growth assumption by 0.5ppt to 2.0%. Maintain BUY with higher TP of S$1.85 (from S$1.75 previously) based on DCF (WACC:9.3%; TGR: 2.0%)

Auto  Engg  services  supported  growth;  Singapore  Bus  losses  widened. CD's  2Q12  EBIT  growth  was  largely  supported  by  the  Automotive  Engineering Services  segment in which EBIT  grew 86%  YoY to S$15.4 (+66% QoQ) on  the back  of  stronger  diesel  sales.  Singapore  Bus  performance  remained  lacklustre, with  losses  increasing  by  224%  YoY  to  S$4.8m  as  high  fuel,  staff,  repair  and maintenance  and  depreciation  costs  continue  to  compress  margins.  CD  has commented  that  90%  of  fuel  costs  over  the  next  six  months  for  SG  have  been hedged.  On  a  positive  note,  60%  of  electricity  costs  have  been  hedged  for  the rest of FY12, at a rate better than that in 1H12.

Continue  to  look  for  overseas  expansion  opportunities.  We  believe  CD's strong  overseas  network  allows  it  room  for opportunities  outside  a  somewhat saturated Singapore market. Though we expect its recent acquisition of Deanes Transit  Group  in  Australia  to  only  contribute  ~1.4%  to  FY13  EBITDA,  such acquisitions  substantiates  CD's  stance  on  looking  towards  overseas  for  growth. As such we have increased our long term growth assumption by 0.5ppt to 2.0%.

Valuations  attractive.  At  FY12  P/E  of  13.5x,  CD  remains  more  attractive  than SMRT's  18x FY13  P/E (FYE Mar).  CD's widespread  overseas  network allows  it better overseas growth prospects which we view as a strong advantage.

Source: OSK