By: Kevin Yee Goh Jian Jun

Transcription

1 By: Kevin Yee Goh Jian Jun

2 Disclaimer Please note that the information is provided for you by way of information only. All the information, report and analysis were and should be taken as having been prepared for the purpose of general circulation and that none were made with regard to any specific investment objectives, financial situation and particular needs of any particular person who may receive the information, report or analysis (including yourself). Any recommendation or advice that maybe expressed in or inferred from such information, reports or analysis therefore does not take into account and may not be suitable for your investment objectives, financial situation and particular needs. You understand that you buy and/or sell and/or take any position in/or on the market, in any of the stocks, shares, products or instruments etc. based on your own decision(s). This is regardless of whether the information is analysed or not, regardless of the details or information related to price levels, support/resistance levels and any information based on technical or fundamental analysis. You understand and accept that nothing told or provided to you whether directly or indirectly is to be a basis for your decision(s) in relation to the market or your trades or transaction(s). Please see a registered trading representative or financial adviser for formal advise.

3 Agenda Company Background Porters Five Forces Risk Factors Valuation Future Direction Q&A

4 Company Background ComfortDelgro is the world s second largest transportation company with 46,200 vehicles Chairman is Lim Jit Poh CEO/ Managing Director is Kua Hong Pak Market Leader in Singapore: 15,567 Taxi fleet 60.6% of market share Owns 75% of SBStransit and 68.19% of Vicom Ltd SBStransit is also the operator of downtown line

5 Operating Profit By Country 0% 0% 14% 17% 11% 58% singapore australia UK china vietnam malaysia Source: Company Annual Report

6 Porter s Five Forces Bargaining Power of Suppliers Suppliers of vehicles do not have strong bargaining power, as Comfort can change from one supplier to another However suppliers of fuel have power over Comfortdelgro Source: Bloomberg

7 Porter s Five Forces Bargaining Power of Customers Weak Bargaining power Consumers do not have many choices, when it comes to choosing their transport options Singapore Threat of New Entrants The threat of new entrants is low as infrastructure and demographic size cannot support too many players. Comfort clearly has the clear advantage in market share and can dictate what happens in the industry

8 Porter s Five Forces Competitive Rivalry within an Industry The Industry is pretty mature, with various major players including Comfortdelgro and its subsidiaries (SBS transit) able to control the pricing of the market, therefore competitive forces are weak Threat of Substitute Products Substitute products in this case are either too expensive(owning your own car) or too inconvenient(riding a bicycle)

9 Future Direction Completion of downtown line in 2017 Comfort plans to expand its businesses overseas, so that 70% of its profits come from overseas Slow growth from UK weak GBP and UK economy Australia taxi and bus business continue to grow Additional 1000 taxi licenses in China

10 Risks Revenue is heavily exposed to overseas markets like UK (22%), Australia(12%) and China(9%) Exchange Rate Risk Oil prices Regulatory risk

11 Overall Assessment Value Shares Mainly recurring business - stable profits Low Competition should be able to sustain operations over long term Expect higher than normal growth in next 2 years due to overseas expansion plan. Long term sustainable growth expected to be nominal Strong cashflow

12 Trading Data 52 week range $ $1.58 Market Capitalization Share Outstanding $3.1 B 2,091 M Average Daily Volume (3 mth) 2,822,000 Source: Yahoo! Finance

13 Key Financial Highlights Increase FY 2011 FY 2010 Revenue 6.4% 3,411 3,206 Op expenses 6.9% 3,011 2,816 Op profit 2.8% Shareholder s net profit 3.1% EBITDA 5.4% EPS (cents) 2.9% Source: Company Report

14 Valuation Use Dividend Discount Model (DDM) Rationale Business Model generates Stable Profits Consistent in Dividend Distribution Significant Dividend Payout Ratio

15 Historical Dividend Payout E2011 EPS (Cents) DPS (Cents) Div Payout Ratio % 85% 52% 50% 50% 53% Source: Company Report

16 Dividend Payout Forecast EPS (Cents) DPS (Cents) 2012F 2013F 2014F F Onwards Assume 3% growth 1.84 (Terminal Value) (Assumes Dividend Payout of 50%)

17 Valuation Calculation Long Term Growth Rate 3.0% Risk Free Rate (RFR) 3.0% Beta (from Reuters) 0.52 Equity Risk Premium (ERP) 7.5% Cost of Equity 6.9% RFR + Beta * ERP (Cents) FY12e FY13e FY14e Terminal Dividend FY15e DPS NPV $1.69 (r-g) (Fair Value) = 7.0 (1.03) 6.9% - 3.0%

18 Recommendation & Price Target Target Price $1.69 Current Price (16 Feb 2012) Recommendation $1.49 Hold (Price difference less than 20%)

19 Peer Comparison Price (local currency) Mrkt Cap (USD) P/E (2011) 3 yr EPS (CAGR) P/B (2011) Comfort Delgro , % 1.69 SMRT , % 3.42 MTR Corp , % 1.26 Source: Company Report, Bloomberg

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