• 1H21 results within expectations. Revenue and PATMI of S$1,742mn/S$91mn form 46%/46% of our FY21e estimates. Earnings include government relief of S$57.2mn.
• Largest turnaround in taxi division. EBIT improved S$89.4mn in 1H21 despite continued rental discounts. Taxi rental rebates in Singapore of 20% in 1Q21 rose to 35% in 2Q21 due to Phase 2HA.
• Singapore is transitioning to endemic COVID-19. This implies an end to lockdowns as vaccinations make good progress. Our FY21e forecasts are unchanged. DCF target price (WACC 7.7%) maintained at S$1.83. Comfort is our preferred transport proxy for Singapore’s reopening and normalisation. Balance sheet strengthened in past 12 months despite pandemic. Net cash of S$493mn in 1H21, up from S$73.8mn in 1H20.

The Positives

+ Operating leverage intact. Revenue rose S$208mn YoY to S$1.74bn. Due to the business’ large fixed costs, around three-quarters of the revenue increase or S$154mn immediately translated into higher earnings. Taxis benefited from lower rental discounts while public transport gained from higher rail ridership and fuel indexation.

+ Return of interim dividends. FCF in 1H21 was S$287mn, up from S$189.1mn in 1H20. Interim DPS of 2.1 cents represents a payout of 50%. This is still below the 4.5 cents and 66% paid out before the pandemic in 1H19.  Capex will likely trend below pre-pandemic S$300mn levels as a programme to purchase hybrid taxis is in its last stages with 600-700 units left to be purchased.

The Negatives

– Nil.

Outlook

Operating leverage and end of lockdowns are earnings catalysts, in our view. Pre-pandemic revenue and operating profit in 1H19 were S$1.92bn and S$222mn respectively. These compares with current operating profits before government relief of S$77mn. Our FY22e forecastes assume a close-to-full recovery to pre-pandemic levels.