Towards Financial Freedom
ComfortDelGro - Aussie Bus Buy Value Accretive
ComfortDelGro (CD) announced that it is buying Driver Group's Melbourne bus business for AUD22m (SGD27m). The acquisition's estimated EV/EBITDA is 5.8x while CD is currently trading at 6.5x FY13 EV/EBITDA. As we are positive on the acquisition, we raise our FY13/14 earnings forecasts by 0.6%/1.1%. Maintain BUY, with a higher SGD2.25 TP (vs SGD2.20 previously), based on DCF (WACC: 9.0%; TGR: 2.5%).
- A value accretive acquisition. We think the acquisition offers good value to CD as the purchase was done at 5.8x EV/EBITDA, lower than CD's FY13 EV/EBITDA of 6.5x. We note that CD's Australian bus segment commands lucrative EBIT margins of 19% - the highest amongst its bus segments. The EBIT margin for this acquisition is estimated at 22%. CD's Australia bus unit is also its biggest contributor to bus profits, making up 22% of group operating profit.
- Only buying the metropolitan bus routes and fleet. The Driver Group is a family-owned company based in Melbourne. It operates metropolitan bus routes in Melbourne's eastern suburbs, as well as operates school services, tourist shuttles and charter services. However, CD is only buying the group's five metropolitan bus routes and its fleet of 42 vehicles. CD is expected to gain some synergy from operating from its existing depots in Oakleigh.
- Still positive on group's overseas businesses. As the rail and bus operators in Singapore continue to face challenges, we are positive on the growth potential of CD's overseas businesses, which make up 46% of operating profit and fetch higher operating margins of 13.2% (versus 10% for Singapore). Management is targeting for its overseas profit contributions to hit the 50% level.
- Stock still offers value. At a FY13 P/E of 16.8x, CD is still more attractive than SMRT's 25.0x FY14 P/E (FYE Mar). We like CD's strong overseas network, which enhances its overseas growth prospects. We view this as a distinct advantage given the challenges facing the domestic land transport market.
Source: OSK
Related Stocks
| Chart | Stock Name | Last | Change | Volume |
|---|
Market Buzz
More articles on Towards Financial Freedom
Duty Free International Ltd. - A duty-free giant in the making
Created by kiasutrader | Oct 17, 2016
Cityneon Holdings - 'Avengers' showcasing in the Land Down Under
Created by kiasutrader | Jun 07, 2016
Discussions
Be the first to like this. Showing 0 of 0 comments
Post a Comment
Featured Posts
New Update. Discover investment communities that resonate with your ideas
Trade Confidently & Analyze Charts Conveniently - Download VCPlus IOS & Android App Now!
Latest Videos
Apps
Top Articles
1
RHB Investment Research Reports
United Overseas Bank - 2025 Shaping Up to be An Interesting Year
2
RHB Investment Research Reports
OCBC Bank - More Patience Needed on Capital Management Plans
3
SGX Market Updates
SIA Engineering Resumes Buybacks After Reporting H1 FY2025 Results
4
THE SINGAPOREAN INVESTOR
DBS, UOB, or OCBC - Which Bank Had the Best Performance for Q3 and 9M FY2024?
5
RHB Investment Research Reports
Venture Corp - Soft Demand Delaying 2H Recovery; Maintain BUY
#
Stock
Score
Daily Stocks
Stock Name
Last
Change
Volume
Stock Name
Last
Change
Volume
Stock Name
Last
Change
Volume
Featured Advertisers / Partners
Ride The Bull Short The Bear
CS Tan
4.9 / 5.0
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
