RHB Group Research analyst Shekhar Jaiswal has kept “buy” ComfortDelGro (CDG) as Singapore looks to gradually reopen the domestic economy.
“As the country looks to gradually reopen the domestic economy, and as it adds more countries to the Vaccinated Travel Lane, we should see improved operating metrics for CDG’s public transport and taxi businesses,” writes Jaiswal in an Oct 15 report.
“The higher inflow of international travellers expected in 2022 will be positive for Singapore’s land transport sector. Earnings recovery in its overseas businesses will also likely be visible in 2HFY2021, as the UK and Australia have relaxed restrictions,” he adds.
To this end, Jaiswal has upped his target price estimate on the transport operator to $2.10 from $2.03 previously.
See: ComfortDelGro’s EV charging points business should generate high margins, but will take a few years: RHB
The new figure incorporates an environmental, social and governance (ESG) rating premium into the brokerage’s valuation.
RHB derived an ESG score of 3.56 out of a total of 4.0 with its in-house proprietary methodology.
“As the ESG score is above the 3.0 median score for our Singapore coverage universe, we apply a premium of 11.2% to our $1.90 fair value to arrive at a [target price] of $2.10,” says Jaiswal.
Despite the higher target price estimate, the analyst has cut CDG’s earnings for the FY2021 by 6% on the back of the latest round of Covid-19 restrictions.
That said, he is buoyant on CDG’s prospects, as he sees that the reopening of the economy and international borders in the next three to six months will support its earnings recovery.
To this end, Jaiswal recommends that investors should use the current share price weakness as an opportunity to accumulate shares in the counter.
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At present, CDG is trading at 15.1 times FY2022 price-to-earnings (P/E), which is below the 10-year average P/E of 15.8 times, “despite offering likely 25% profit growth”.
Shares in CDG closed flat at $1.56 on Oct 20, implying an FY2021 P/B of 1.3 times and dividend yield of 2.6%.
Photo: CDG
