ComfortDelGro - DBS Research 2022-08-15: Mid-Year Surprise 70% Payout & Special Dividend

ComfortDelGro - Mid-Year Surprise 70% Payout & Special Dividend

  • ComfortDelGro (SGX:C52) reported 1H22 attributable net profit of S$118.7m, equating to an improvement of 30.4% y-o-y, on the back of 6.7% increase in revenue to S$1.86bn. As of half-time, headline net profit accounts for 58% of our FY22F estimates.
  • An interim dividend of S$0.02 equating to a payout ratio of 70% was declared. On top of that, a special dividend of S$0.0141 was also declared, which came out of the disposal gains of its Alperton property in London. In our view, this probably signals ComfortDelGro's Board & management improved confidence in the group’s balance sheet and recovery from COVID restrictions seen in the past 2 years.
  • 1H22 operating profit excluding disposals and government reliefs surged by a strong 67.6% to S$126.9m. 2H22 should show sequential improvement.
  • ComfortDelGro has indicated that it “maintains a cautiously optimistic outlook for 2022” in its results announcement.

Comments on ComfortDelGro's 1H22 segment results and takeaways from ComfortDelGro's earnings call

Public Transport segment revenue +8.1%, operating profit +48.4%.

  • Revenue for the segment in 1H22 was at S$1.49bn (+8.1% y-o-y) mainly due to higher rail ridership and fuel indexation in Singapore. The strong operating profit growth was helped by its net gain on disposal of Alperton property in London and higher revenues. Excluding the disposal gain (S$37.2m), operating profit would still have been 3.8% higher at S$85.6m in 1H22.
  • We noted that there were government reliefs amounting to S$47.9m in 1H21 for its Public Transport segment, which have dropped to S$8.1m in 1H22. Excluding disposal gain and government reliefs, operating profit in 1H22 would have been S$76.5m, more than doubled that of 1H21 (S$34.1m).
  • Besides higher ridership and fuel indexation, public transport benefited from private charter projects in Singapore and the UK

Taxi – a brighter spot in Singapore.

  • Revenue for its Taxi segment decreased by 6.5% y-o-y to S$211.3m, mainly due to rental waivers in China (~S$10m) and absence of contribution from its London taxi business post divestment in 1H21 (~S$9m). This was partially mitigated by higher revenues in Singapore from lower rental discounts and higher call volumes. Operating profit for the segment was S$21.2m (+18.4% y-o-y), mainly from its Singapore operations.
  • Management shared that its taxi call bookings in Singapore have exceeded pre-COVID, while fleet size decline has stabilised with small uptick. Management is focusing on drivers’ recruitment though shared that it is challenging.
  • The focus is to pivot towards keeping its vehicle rental rates competitive, with discounts, and pivot more towards revenue sharing model, ie taking a certain percentage of fare revenue via call bookings. This will lower the fixed cost barrier for drivers, while allowing the sharing of upside potential.

Automotive engineering’s revenue increased by 17.1% y-o-y to S$100.1m mainly due to higher fuel prices and volume.

  • Operating profit, however, was lower by 16.1% to S$4.7m due to the lagged effect of higher fuel pump price increase vis-à-vis oil price increases as well as absence of government reliefs. With recent retreat in oil prices, there should be some let up in pressure and reversal of the trend in 2H22, in our view.

Other business segments.

  • The other smaller business segments of the group were a mixed bag.
    • Its Inspection and Testing business benefitted from recovery in activities.
    • Car Rental and Leasing saw higher revenue from expansion in its PHV (Private Hire Vehicle fleet).
    • Driving centre and Bus Station both saw lower revenues with the divestment of its Nanjing driving school in China in 1H22, while the latter continued to be impacted by China’s lockdown and travelling restrictions in 1H22.

ComfortDelGro - Earnings Forecasts and Valuation

  • We retain our FY22F/ 23F forecasts for ComfortDelGro with expectations of 27%/ 24% (pre-exceptional) earnings growth. Our target price is based on the average of forward EV/EBITDA and P/B valuations. We peg ComfortDelGro to a forward EV/EBITDA of 5.3x and P/B of 1.25x, both of which represent the -1 standard deviation level from the 10-year mean.
  • With the interim dividend of 2.85 cents equating to 70% payout, along with the special dividend of 1.41 cents declared, this gives us greater confidence in raising our expected dividend payout to ~70%, from ~55% previously.
  • Trading at 1.1x P/B (-1 standard deviation 4 year average) with recovering profitability, and a projected yield of 5% (FY22F), we believe upside significantly outweighs the downside for ComfortDelGro's share price.

Above is the excerpt from report by DBS Group Research.
Clients of DBS may access the full report in PDF @

Andy SIM CFA DBS Group Research | 2022-08-15
SGX Stock Analyst Report BUY MAINTAIN BUY 1.950 SAME 1.950

Previous report by DBS Research:
2022-05-17 ComfortDelGro - Better Taxi Economics Ahead

Target prices by 5 other brokers at ComfortDelGro Target Prices.
Listing of broker reports at ComfortDelGro Analyst Report.

Relevant links:
ComfortDelGro Share Price History,
ComfortDelGro Announcements,
ComfortDelGro Dividends & Corp Actions,
ComfortDelGro News Articles


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