Towards Financial Freedom
SLF Sell-Down Presents Opportunity
Singapore Labour Foundation (SLF), ComfortDelGro's (CD) biggest shareholder is paring down its stake via a block trade of 170m shares worth c.SGD330m. SLF's stake will fall c.8ppt to c.3.9%. CD's share price fell 12% on Thursday, which we believe presents a good buying opportunity. We are not concerned by the sell-down as fundamentals remain strong. Maintain BUY and TP of SGD2.25.
- 12% sell-down presents a good opportunity to accumulate. CD's share price fell 12% last Thursday following the paring down of SLF's stake. We think this sell-down is unwarranted given that company fundamentals remain intact, and this presents a good entry point for investors looking to accumulate.
- This could simply be a timely exit for SLF. SLF is a statutory board of the Ministry of Manpower (MOM) that aims to develop Labour Movement that support Singapore's growth as well as the well-being of working people in Singapore. As CD's overseas businesses grew and now accounting for 46% of group operating profit, coupled with CD's aim to hit 50% profit contribution from overseas, we think that SLF's involvement with CD could be less relevant now. Moreover, with the recent 32% six month run up in share price (22 May 13 close), we think SLF simply sees this period as an opportunistic time to exit.
- No change to business fundamentals, no reason for sell-down. We understand that SLF had been a passive shareholder holding one nonexecutive board seat. We believe the fundamentals of CD remain unchanged and still remain positive on its overseas growth potential to drive earnings.
- CD remains our preferred pick. At a FY13 P/E of 15.5x, CD is still more attractive than SMRT's 24.5x FY14 P/E (FYE Mar). We like CD's strong overseas network, which enhances overseas growth prospects versus SMRT which still faces cost related challenges.
Source: OSK
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