Strong overseas land transport operations with profitable margins. Management that seeks out inorganic accretive opportunities where CD can have majority control. Market leader for taxi in Singapore with about 60% market share. Foothold in Australia and UK Bus business, and strong contender if and when new routes are opened up. EPS and DPS y-y growth with sustainable payout ratio arising from positive operating cash flow.
ComfortDelGro Corp. Ltd. 29 April 2014 Page | 4 Outlook for CD Singapore Businesses Rail – Impacted in the recent quarter due to start up costs for the Downtown Line (DTL). Though start-up costs are a one-time expense, but we think that DTL will continue to be a drag until the rest of the line is opened, in which time the benefits of scale can be realised. DTL is currently operating under-capacity as the line is not fully constructed. Only 6 stations have been opened, with 12 and 16 more to come in Stage 2 and 3 respectively. We expect to see some improvements once passenger numbers pick up on the DTL. There is still room for growth in the ridership numbers for the Sengkang and Punggol Light Rail Transit (SPLRT) network, because most of the surrounding housing developments are still work-in-progress. Ridership numbers should pick up once the housing projects are completed and occupancy increases. Bus – We believe that the Bus business in Singapore continues to look bleak, until a sustainable model is implemented by the Regulator. At present, Fare-revenue is not able to meet operating costs and SBS Transit (SBST) of which is a 75%-owned subsidiary of CD has been reporting losses in its Bus business since 2Q11. We forecast SBST's Bus operations to continue being unprofitable until a new bus model is implemented in Singapore by the Regulator. (Currently, losses from SBST's Fare-business are offset by profits from the ancillary businesses of Advertisements and Rental, resulting in net profit.) On the other hand, CD's subsidiary ComfortDelGro Bus Pte Ltd, which provides chartered services, continues to be running profitably, albeit at a thin margin of only 6.7% and accounting for only 0.5% of total revenue in FY2013. Taxi – Management guided a higher than usual Capex in FY15 to renew their fleet. CD had previously deferred purchase of new taxis due to the high COE levels. A newer taxi fleet translates to higher taxi revenue as CD can hire out their new taxis at a higher fee. Hence, we are expecting revenue growth for the Singapore taxi business, after the acquisition of the new taxis. We believe that CD will continue to see growth in taxi bookings, due to its leading position in the market. Cashless transactions will continue to lift profits for this segment as well. Automotive Engineering Services – Management guided that revenue is expected to be maintained. This business segment would continue to support its vast fleet of buses and taxis in Singapore.
You've reached the end of your free preview.
Want to read all 22 pages?
- Fall '13
- Revenue, operating profit, Public transport bus service, Bus Station, Phillip Securities Research