ComfortDelGro - On The Road To Recovery
- While the surge in COVID-19 cases arising from Omicron variant has dampened mobility from Dec 21 to Feb 22, Google Mobility showed meaningful recovery across ComfortDelGro (SGX:C52) ’s key geographies (Singapore, UK, Australia) in Mar, in line with easing COVID-19 restrictions. We expect further recovery in 2Q22F, with the Singapore government taking a decisive step towards the nation’s reopening.
- ComfortDelGro’s rail ridership was at 70% of pre-COVID levels in Mar 22 (Feb 22: 66%); we forecast recovery to 85% of pre-COVID levels by end-FY22F. Aside from rail ridership recovery, we believe its framework agreement with the Land Transport Authority (LTA) will contribute positively to earnings in FY22F.
- Meanwhile, the lower service fee for renewed bus contracts (-S$11m impact for FY22F) will only be effective from Sep 22F.
- In view of higher fuel prices and operating costs, both taxi and private hire platforms have raised base fares to ease cost burden on the drivers. However, aggressive promotional campaigns currently offered by ride-hailing platforms in Singapore could limit ComfortDelGro’s ability to narrow taxi rental rebates (15%) offered to its drivers in the near term, in our view.
- While we think ComfortDelGro could see tough comps on a y-o-y basis for its 1Q22F earnings, we reiterate ADD as we expect 34% EPS growth in FY22F from ridership recovery in the coming quarters. We lower our FY22-24F EPS forecasts by 3.5-6.8% on the back of lower taxi rental rate assumptions. Our target price for ComfortDelGro is kept at S$1.80, still based on 16.8x CY22F P/E (0.5 standard deviation above its 5-year historical average).
Above is the excerpt from research report by CGS-CIMB.
Clients of CGS-CIMB may access the full report in PDF @ https://www.itradecimb.com.sg/.
ONG Khang Chuen CFA CGS-CIMB Research | https://www.cgs-cimb.com 2022-04-12 2022-04-12
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