Land transport operator ComfortDelGro has reported 1HFY2022 earnings showing a significant improvement over the pandemic levels. The company has also declared a special dividend on top of an interim dividend.
However, to take into account a stronger Singdollar, which will result in a negative translation effect for the company’s UK, China and Australian operations, analysts from both Maybank Securities and CGS-CIMB have slightly trimmed their target prices.
Maybank’s Eric Ong has kept his “buy” call but with a revised target price of $1.75, from $1.76 previously; CGS-CIMB’s Ong Khang Chuen, similarly, has kept his “add” call but with a lowered target price of $1.75, from $1.80 previously.
RHB's Shekhar Jaiswal, likewise, trimmed his target price to $1.75 from $1.77. "While we remain upbeat on its earnings recovery, there could be a near-term share price overhang as investors assess the impact of the amended service fee from 1 Sep onwards, for five public bus contracts in Singapore and whether ComfortDelGro extends the taxi rental rebates beyond end-Sep 2022."
UOB Kay Hian's Llelleythan Tan, meanwhile, has a "buy" call but has kept his $1.73 target price. "Backed by improving fundamentals, ComfortDelGro remains poised to see a gradual recovery in ridership levels in the medium term as key markets recover and international travel resumes," writes Tan in his Aug 15 note.
PhillipCapital's Paul Chew has also kept his "buy" call with an unchanged target price of $1.80. "[ComfortDelGro's] recovery is at a nascent stage. Return to office and other activities started only in the later part of 2QFY2022," he writes in his Aug 16 note.
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"We expect 2HFY2022 to be stronger. Taxi revenue will benefit from the rising number of trips and an increase in booking fees. Rail ridership is recovering strongly from a surge in ridership," he adds.
The more bullish call was from DBS Group Research’s Andy Sim, which has his “buy” call and target price at $1.95. “The counter’s price has been slow to shake off its Covid-impact embrace given lingering restrictions such as China’s zero-Covid policy. Slowly but surely, activities are returning to norm, as we see activities and mobility increase in Singapore, Australia and the UK,” writes Sim.
For 2QFY2022, the company reported earnings of $42 million, up 21% y-o-y. Improvement was seen particularly so in its public transport businesses.
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Its taxi business has picked up too with drivers reportedly now making more than what they used to before the pandemic.
“We think this could pave the way for ComfortDelGro to tweak its taxi business monetization structure,” writes CGS-CIMB’s Ong in his Aug 15 note.
“To better compete with private higher vehicle platforms, we believe ComfortDelGro could keep its 15% taxi rental rebate (to lower fixed cost for cabbies) but raise its commission fees (currently at 4%, versus Gojek’s 10% and Grab’s 20%) in coming months,” he adds.
During the quarter, the company booked gains from the sale of a property in the UK, and it plans to return the proceeds to shareholders in the form of a special dividend of 1.41 cents per share.
In addition, the company plans to pay an interim dividend of 2.85 cents per share as well, bringing the total payout for 1HFY2022 to 4.26 cents per share.
“We believe the group will continue to return excess cash to shareholders to even as it looks for growth opportunities overseas and in adjacent settings,” writes Maybank’s Ong.
CGS-CIMB’s Ong’s new target price is pegged to 16.8x FY2023 earnings, which is a 0.5 standard deviation above the company’s five-year historical mean.
“Re-rating catalysts include further adjustment in taxi monetisation and tender win announcements. Downside risks include prolonged strict Covid-restrictions in China,” adds Ong.
ComfortDelGro shares changed hands at $1.48 as at 12.12pm, unchanged for the day.
