■ Lofty valuation has reflected positives from bus transition.
■ Market is complacent on three fronts:
1) threats to taxi
2) sale of bus assets not a given;
3) weakening AUD.
■ D/G to contrarian SELL from HOLD, cut TP to SGD2.70 (17x
FY16E PER) from SGD2.90
Upside priced in…
Trading at a lofty 23x PER and 2.8% yield, we believe CDG has
priced in upside from the impending transition at its Singapore bus
business. It is also trading at a hefty 60% premium to the market
(vs 3% premium since end-2008). CDG’s stub value (stripping out
SBST and VICOM) has also surged despite no material positives for
the rest of its business. It even outperformed SBST since end-2013.
…and market is complacent on three fronts:
We believe the market is complacent on three fronts.
to the taxi business (31% of sales, 34% of EBIT). We expect the
growing presence of Uber to pose a structural threat to its taxi
business. Regulators in Singapore appear to be adopting a lighttouch
and we expect taxi rentals to be under pressure.
2) Sale of
its bus assets to the government is logical, but it is not a given.
Market expects a potential windfall from the sale of its bus assets
but this is not a done deal. While it is logical for the government
to buy its bus assets, it has never announced a decision on this. A
leaseback is still possible. The government will be cautious not to
be seen as giving private entities a large handout, especially with
the General Elections looming.
3) Impact of weakening AUD (10%
of sales, 16% of EBIT). The AUD has already depreciated by c.7%
on average from last year (SGD/AUD: YTD15 - 1.06 vs 2014
average- 1.14) and our Maybank FX Research team expects this
weakness to be sustained with 1Q16 forecast of 1.03.
Downside risks. Lowering TP to SGD2.70. D/G SELL
We lower our FY15-17E EPS by 0.9%/4.7%/7.4% and roll forward to
17x FY16E EPS (0.5SD above its 10-year average)
. We lower our TP
to SGD2.70 (from SGD2.90) and downgrade to SELL from HOLD
. (Read Report)
Source : Maybank Kim Eng Research
Labels: ComfortDelgro, Transportation Sector