• 4Q20 PATMI is 40% below expectations due to lower-than-expected public transport revenue and earnings.
• QoQ, 4Q20 EBIT swung from S$0.2mn loss in 3Q20 to S$29.7mn profit, excluding government relief. Taxis returned to profitability in 4Q20.
• Comfort is emerging out of the pandemic with an even stronger balance sheet. Net cash of S$279mn was up from S$64mn in FY19.
• Recovery is underway with economic reopening, rebound in fuel index and dialling back of taxi rebates. Maintain BUY and DCF target price of S$1.83 (WACC 7.7%). Taxis to lead the rebound with lower rental relief. Public transport to lag as traffic volumes are still almost 30% below pre-pandemic levels. Our FY21e forecasts are relatively unchanged.

The Positives

+ QoQ improvement in revenue and earnings. QoQ, revenue increased S$69mn to S$885mn. EBIT swung back to a positive S$29.7mn from S$0.2mn losses in 3Q20, excluding government relief. The improvement came from taxi operations, which returned to a profit of S$9.7mn from 3Q20’s -S$7.2mn.

+ Healthy cash flows. Operating cash flow in 4Q20 was S$143mn or an estimated S$100mn excluding government relief (4Q19: +S$206mn). Net cash spiralled to S$279mn from S$64mn in FY19. FCF in FY20 was S$513mn, up from S$377mn in FY19.

 The Negatives

– Public transport still languishing. QoQ, public transport revenue rose S$60mn to S$700.5mn . And EBIT declined from QoQ from S$8mn to S$1.6mn, excluding government relief. Profitability was worse than other smaller divisions in the group such as engineering and inspection. SBS repairs and maintenance costs rose around 10% YoY in 2H20. Money was spent on the refurbishment of ageing trains and the bus fleet, on top of the frequent cleaning of buses and trains.

– Dividends slashed. Final dividend was 1.43 cents, an 85% plunge from the 9.79 cents paid in FY19. There was no interim dividend in 1H20, unlike 1H19’s 4.5 cents. Payout ratio was 50% in FY20, down from 80% in FY19.