We keep our FY15-17 EPS estimates intact and reiterate our Add call on CDG with an unchanged DCF-based target price of S$3.42 (WACC: 7.5%). Key catalysts ahead include earnings contribution from DTL stage II & III and continued overseas expansion via M&As.
What We Think
We see plenty of catalysts that would drive the group’s earnings growth over the next 2-3 years. In particular, we believe that the share price has yet to factor in prospective earnings-accretive M&As, which would be backed by the group’s strong balance sheet (CDG was in a net cash position of S$153m at end-1Q15). In light of the low-teens ROE of CDG’s existing overseas businesses, we estimate that every S$100m equity investment could potentially lead to S$13m-14m gain in earnings, equivalent to c.5% of FY14 net profit.
What You Should Do
We reiterate Add on CDG with an unchanged target price of S$3.42. CDG remains our preferred pick in Singapore’s land transportation sector. (Read Report)
Source : CIMB Research