ComfortDelGro Corporation’s 1Q FY14 results were largely in line
with market expectations. Excluding the currency translation effect
arising from the stronger Sterling Pound and Chinese Renminbi,
revenue actually rose by 8.7% yoy to $947 mln underpinned by
broad-based growth in its key businesses (except for the car rental
and leasing business).
Not surprisingly, local bus operations continued to be in the
red, losing $4.7 mln for 1Q due to higher operating costs while
rail operations also incurred a slight operating loss of $1.0 mln,
attributed mainly to start-up costs associated with the Downtown
Line (DTL). Nonetheless, net profi t still grew by 9.7% yoy to $63.3
mln due to strong overseas contribution, which now accounted for
50.8% of total group operating profit.
We expect the announced fare adjustments which took
effect last month will help to mitigate some of the cost pressures
going forward. In addition, the core rail business
(excluding advertising and rental) should be able to breakeven
along with the improvement in average daily ridership for DTL1 from
the current 54,000.
With the share price already running ahead of the results, we
think that the stock may be prone to profit-taking in the short
term . Nevertheless, we continue to prefer ComfortDelGro
over SMRT on cheaper valuations as well as its geographical/
business diversification. Recommend Buy on
weakness.
http://iinvestiearnipost.blogspot.com/2014/05/comfortdelgro-corporations-1q-fy14.html