SINGAPORE (Feb 24): Analysts remain optimistic on land transport operator ComfortDelGro, following the release of its results for FY2019 ended December, on Feb 14.
The group posted a 12.6% decline in its FY2019 earnings to $265.1 million, from $303.3 million a year ago. This follows higher operating costs such as the $27 million incurred from the impairments in its taxi business.
Aside from taxi operations, the group’s core competencies are in public transportation and inspection and testing services.
See: ComfortDelGro posts 12.6% drop in FY19 earnings to $265.1 mil as taxi business continues to slide
“Excluding the one-off impairment charge, 4QFY2019 net profit of $76 million would have been the highest quarterly profit in FY2019,” says Joel NG of KGI Securities in a Feb 24 note.
As such, he is “surprised” at the group’s dividend payout, saying it “misses [his] expectations by a mile”.
The board has recommended a final tax-exempt, one-tier dividend of 5.29 cents a share, down from the previous year’s recommendation of 6.15 cents per share.
Along with the interim dividend of 4.5 cents paid previously, this brings the group’s dividend for the year to 9.79 cents per share.
“The lower FY2019 dividend breaks a 10-year uninterrupted growth in dividends, which is perhaps a key for the significant negative reaction [to its] share price,” Ng points out.
“[This signals] a more challenging environment for the year ahead,” he notes, adding that these challenges will be from service cost pressures in Singapore and foreign exchange volatility from a weaker AUD and GBP.
Aside from this, he is concerned that the ongoing novel coronavirus outbreak (Covid-19) may present spend bumps to group, this quarter.
However, the group is already addressing this through an $18 million relief package for cabbies who have been hit by falling demand.
With cash and cash equivalents of $594.2 million at end December, Ng says ComfortDelgro is in a comfortable position to tide the uncertain global economy.
“Its valuation metrics are all green in our view, with a 6x forward EV/EBITDA, near-net cash position, 1.8 times price to book ratio and 5% dividend yields,” muses Ng.
He adds, “despite the challenging environment over the next 12 months, ComfortDelgro remains in an enviable position to recover when the situation improves.”
To this end, KGI is maintaining its "outperform" call on the stock, but at a lower target price of $2.28 from the previous $2.61.
ComfortDelgro’s shares were down 1.49% to close at $1.99.
