ComfortDelGro Corp Ltd – Clearer recovery path August 19, 2021 222

PSR Recommendation: BUY Status: Maintained
Target Price: 1.83
  • 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.

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About the author

Profile photo of Paul Chew

Paul Chew
Head of Research
Phillip Securities Research Pte Ltd

Paul has 20 years of experience as a fund manager and sell-side analyst. During his time as fund manager, he has managed multiple funds and mandates including capital guaranteed, dividend income, renewable energy, single country and regionally focused funds.

He graduated from Monash University and had completed both his Chartered Financial Analyst and Australian CPA programme.

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