- We upgrade ComfortDelGro (SGX:C52) from Hold to Add as we see a fundamental inflection point – we estimate its PATMI could return to y-o-y positive growth in 2Q23F (+3% y-o-y) and see an even stronger showing in 2H23F (+65% y-o-y) on multiple earnings catalysts highlighted below.
- - Read this at SGinvestors.io -
- Re-rating catalysts include
- stronger margin repair on cost pass-through for public transport segment, and
- further hikes to ComfortDelGro’s commission fees chargeable for rides booked via CDG Zig app.
- - Read this at SGinvestors.io -
- negative FX translation impact given the strong Singapore dollar, and
- intense competition resulting in lower public bus segment margins upon tender renewal.
Catalyst 1: Raising taxi monetisation to drive earnings growth
- We forecast taxi segment EBIT to rise 50% y-o-y to S$78m in FY23F. ComfortDelGro lowered its taxi rental rebate (Apr 23) and introduced platform fee for rides booked via its CDG Zig app (Jul 23) in Singapore; we see potential for commission rate increases in 4Q23F as the current industry landscape remains favourable for point-to-point transport players.
- Recent newsflow of several world-renowned artistes adding and selling out additional shows in their Singapore concert series also helps create a virtuous cycle and reinforces Singapore as an entertainment destination for tourists, and we see ComfortDelGro as a beneficiary.
Catalyst 2: Cost pass-through for UK public bus taking shape
- Read more at SGinvestors.io.
