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FY2021 marks beginning of stronger recovery for ComfortDelGro: Maybank Securities

·3-min read

As at 2.02pm, shares in CDG are trading 1 cent higher or 0.73% up at $1.38.

Maybank Securities analyst Eric Ong has kept “buy” on ComfortDelGro (CDG) as he sees the transport operator remaining as a good proxy to the reopening of borders and the rising economic activity.

“In our view, FY2021 marks the beginning of a stronger recovery as [CDG’s] public transport services continue its sequential improvement, while its taxi business has also turned around in 4QFY2021,” writes Ong in his March 10 report.

“The group has a rock-solid balance sheet with net cash position of $519.8 million at end-December 2021. The group just declared a final distribution per share (DPS) of 2.1 cents, taking FY2021 DPS to 4.2 cents (from FY2020’s 1.43 cents), which translates into a sustainable payout ratio of 70%,” he adds.

In his report, Ong is also positive on CDG’s ridership to improve further as rail ridership in Singapore, as well as bus charter services in Australia and coach services in the UK continue to recover in tandem with the higher social mobility.

“The taxi segment should also perform better on lower rental rebates as driver incomes are likely to improve on easing Covid-19 restrictions and resumption of international travel,” says the analyst.

On Feb 8, CDG announced that it would be raising its taxi fares from March 1.

Flagdown fares across its fleet of taxis will increase by 20 cents, while distance-timed rates will see a two-cent increase for every 400m, or 350m after 10km.

There will also be a two-cent increase for every 45 seconds of waiting time for normal taxis

Limousines will see a three-cent increase for distance-timed rates as well as waiting times.

Ong’s target price has, however, been lowered to $1.76 from $1.88 previously on the back of his lowered earnings per share (EPS) estimates for the FY2022 to FY2024.

Following the fare hike, the analyst has lowered his EPS estimates to factor in the increments, from 11.2 cents for the FY2022 as at Maybank's last report on Aug 15, 2021, to 8.6 cents in this report.

The updated EPS estimates will also take into consideration the tapering of government reliefs as well as more conservative EBIT margins due to higher energy and staff costs, says Ong.

To him, a quicker-than-expected stabilisation in the taxi industry is an upside swing factor for CDG. An overseas acquisition that is accretive to the transport operator’s earnings, as well as higher-than-expected passenger numbers for Singapore rails on the North-East Line and Downtown Line or new bids for railway lines under contract model are also upside factors.

Meanwhile, downside factors identified include the higher-than-expected operating cost given the current inflationary pressures. “A decline in taxi utilisation or heightened competition (fares and for drivers) from ride-hailing players [and] slower-than-expected recovery in ridership for its public transport services [are also downsides to CDG],” writes Ong.

As at 2.02pm, shares in CDG are trading 1 cent higher or 0.73% up at $1.38, or an FY2022 P/B of 1.2x and dividend yield of 4.4%.

Photo: CDG

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