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Price target: Maybank Kim Eng “buy” $1.88 Higher target price on prospects of ridership recovery Maybank Kim Eng analyst Kareen Chan has maintained “buy” on transport operator ComfortDelGro (CDG) with a higher target price of $1.88 from $1.76 previously, as she predicts that ridership for taxis and public transport will improve this year. Chan has also upped CDG’s EPS by 23% to account for operating leverage amid a ridership rise. “CDG offers exposure to domestic transport recovery, which should see a faster pace of turnaround compared to aviation. Downside risks include further impairment of UK businesses due to the worsening Covid-19 situation,” she says in a report dated Jan 11.
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The availability of Covid-19 vaccines will also help to boost public transport ridership, making it another positive for the counter. Meanwhile, CDG’s bus contracting model (BCM) should remain stable as these are fixed contracts, and the Covid-19 situation in Singapore and Australia continues to remain under control, she notes. “A sharp drop in fuel prices in January to April 2020 has resulted in lower BCM contract fees in 1HFY2020. With fuel prices recovering since 2QFY2020, we expect BCM to contribute a more stable portion in FY2021,” says Chan. “Thus, we have factored in 4.5% y-o-y revenue growth in public transport for FY2021 as we assume rail ridership will return to 75% of pre-Covid levels,” she adds. Ridership has seen a sharp rebound in 3QFY2020 ended September, as commuters now prefer taking taxis or private hire cars to reduce social interaction. “The momentum should continue to gather steam, and alternative data (the number of taxis at taxi stands during peak hours) suggests that taxi idling rate has decreased around 90% in the past three months,” she says.
OCBC Price target: CGS-CIMB “add” $12.52 New CEO Wong’s Hong Kong experience a positive
SEE:Brokers' Digest 966
They also see Wong expanding OCBC’s Greater China franchise further. Tsien, who will retire in April after running OCBC since 2012, had emphasised OCBC’s strategy in expanding into the region. As a result, the bank’s Greater China loan book grew from $17.4 billion in 2012 to $67.3 billion in 2QFY2020 ended June. In turn, wealth management income rose from $1.8 billion in 2012 to $3.4 billion in 2019. “We expect OCBC to further leverage on its regional connectivity for growth, aiding the bank’s mainland clients in expanding their businesses in Southeast Asia and vice-versa,” they add.
Riverstone Holdings Price target: DBS Group Research “buy” $1.85 Correction brings price to a more attractive level DBS Group Research analyst Ling Lee Keng has upgraded Riverstone Holdings to “buy” from “hold”, albeit with a lower target price of $1.85 from $2.03 previously. The upgrade comes as valuations for the counter have become more “attractive” after a correction of close to 50% in its share price since last November. “Riverstone is now trading at an attractive 7.3 times P/E for FY2021 ended December, which is near –1 standard deviation of its five-year P/E average,” says Ling in a Jan 11 report. “Furthermore, we also expect a bumper dividend for FY2020.” Ling downgraded her rating on Riverstone to “hold” on Nov 11 last year and lowered her target price to $2.03, from her previous figure of $2.76. The downgrade was triggered by news of Covid-19 vaccines becoming available, thus affecting demand for rubber gloves. However, she now sees hygiene remaining a key concern globally. Thus, the demand will not taper off right away. Ling’s new price target is pegged to Riverstone’s average five-year P/E of 12.8 times, but rolled forward to blended FY2021 to FY2022 earnings to capture the impact that the Covid-19 pandemic has brought to the company. She also expects Riverstone’s average selling price (ASP) for FY2021 to be “firm” on the back of strong demand and tight supply. “The ASP increase for January and February is about 5% to 10% m-o-m,” she says. “Order visibility has further extended to December 2021.” — all by Felicia Tan
