Taxi operator ComfortDelGro may have had a bumpy 2020, but the company is getting out, “slowly but surely”, say analysts. Six brokerages recommend ‘buy’', ‘add’ or 'outperform' on ComfortDelGro following its 3Q20 results this week.
For the quarter, ComfortDelGro reported profit after tax and minority interest of $21.7 million, down 69% y-o-y, as the Covid-19 pandemic continues to hurt travel volume across the various markets it operates. Revenue in the same period was down 16.3% y-o-y to $816.5 million.
See: ComfortDelGro reports PATMI of $21.7 million, down 69% y-o-y
CGS-CIMB analysts Ong Khang Chuen and Cezzane See are maintaining ‘add’ on ComfortDelGro, with an unchanged target price of $1.70.
The results are “in line with expectations, say Ong and See in a Nov 12 note. “ComfortDelGro reported 3Q net profit of $22 million (-69% y-o-y), a strong recovery from 2Q20 net loss of $42 million. Stripping out government reliefs (+S$42m) and impairment losses (-S$18m), ComfortDelGro’s normalised operating loss of $0.2 million in 3Q20 was in line with our expectations. Key drags remain taxi ($7 million normalised operating loss) and SBS Transit ($4 million normalised operating loss), due to ongoing taxi rental waiver and weak rail ridership in Singapore.””
The gradual reopening in Singapore will drive further mobility, such as commuting to work, note Ong and See. “According to ComfortDelGro, ridership of rail, bus, and taxi have recovered to about 55%, 70% and 80% of pre-Covid levels as of end-Sept. We forecast both the taxi segment and SBS Transit to return to the black in 4Q20, with further moderation in taxi rental rebates and rail ridership recovery.”
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Overseas, ComfortDelGro took a $18 million impairment in its UK business of which $13 million came from its UK taxi business, where it does not expect the business environment to return to earlier levels even in post Covid-19 era, notes RHB analyst Shekhar Jaiswal.
Jaiswal is maintaining ‘buy’ on the company, with a target price of $1.70. He envisions strong earnings growth in the year ahead. “We lower 2020 earnings 14% to account for seasonally-weaker fourth quarter and lower earnings from the UK amid recently-announced lockdown. Nevertheless, gradual normalisation of business activities in Singapore and ComfortDelGro’s other key markets should support an improvement in public transport ridership and stabilisation of taxi business during 2021. We expect overseas business to see some improvement as well in 2021.”
Maybank Kim Eng analyst Kareen Chan sees green shoots in Australia and China, where ComfortDelGro saw 18.9% and 3.4% of its EBIT respectively. Chan is recommending ‘buy’ on the company with a target price of $1.76.
In Australia, movement restriction was being lifted in Oct after Covid-19 situation in Victoria is under-control. In China, social activities have almost resumed back to pre-Covid levels regionally. “We expect UK/Ireland to be lacklustre as the country is facing a second lockdown. We have adjusted our FY20E EBIT to account for government reliefs, which was previously under exceptional.”
ComfortDelGro’s driving centre is the only segment which saw 3Q20 profits resuming back to normal levels, says DBS Group Research analyst Andy Sim. “This possibly could be due to the backlog that was built up during the Circuit Breaker period in Singapore. On the other hand, its car leasing and rental was impacted by lower rental and discounts.”
Sim is recommending ‘buy’ on the company with an unchanged target price $1.96.
PhillipCapital analyst Paul Chew thinks ComfortDelGro’s healthy cash flows should tide the operator over until Phase 3 of Singapore’s reopening begins. Chew is upgrading the company to ‘buy’ with a target price of $1.83.
Most restrictions on group gatherings in Singapore will be lifted only in 4Q20, says Chew in a Nov 16 note. “Phase 3 should further accelerate ridership in taxis and trains as more religious, social and work activities resume. An area of weakness will be UK’s second lockdown curtailing taxi and coach ridership.”
Chew cut PATMI for FY20F by 50% but raised the FY21F estimate by 16%. “ComfortDelGro is our preferred proxy for a recovery in the transportation sector. Unlike air transport, passenger-volume rebounds are more immediate and pronounced with pricing more stable in a regulated industry,” he says.
Meanwhile, KGI Securities analyst Joel Ng says ComfortDelGro is “moving in the right direction”. He is maintaining ‘outperform’ on the company with a target price of $1.65.
“Business is moving in the right direction as the group remains in a strong financial position,” says Chew in a Nov 16 note.
For FY20/21/22F, Ng expects dividends to be reduced to 2.0/6.5/8.0 cents, implying a dividend yield of 1.3/4.2/5.2%.
As at 3.50pm, shares in ComfortDelGro are trading at 3 cents higher, or 2% up, at $1.53.
