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ComfortDelGro faces 'restructuring whimper' but retains positive cash flow: PhillipCapital

Chloe Lim
Chloe Lim11/17/2021 02:34 PM GMT+08  • 2 min read
ComfortDelGro faces 'restructuring whimper' but retains positive cash flow: PhillipCapital
Phillip Securities Research lowers ComfortDelGro TP from $1.83 to $1.80, claims 3QFY2021 earnings were below expectations
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Phillip Securities Research analyst Paul Chew maintains a ‘buy’ rating on ComfortDelGro, with a modestly lowered target price from $1.83 to $1.80.

According to the analyst, 3QFY2021 earnings were below expectations. This comes when the 9MFY2021 revenue and PATMI was 70%/60% of the FY2021e forecast respectively.

ComfortDelGro’s revenue for 3Q2021 was $880.3 million (compared to $820 million in 3Q2020), experiencing a 7.4% y-o-y increase.

See: RHB maintains ‘buy’ on ComfortDelGro as it looks past near term weakness

In addition, taxi rebates in 3Q2021 resulted in operating losses, where taxi operations suffered $8 million operating losses in 3Q2021 excluding government relief. “Losses have widened from the $2.1 million in the prior quarter,” says Chew.

Operating cash-flows for the company remains healthy however, coupled with record cash levels. Chew noted that FCF generated during the quarter was around $95.2 million (compared to $137.7 million in 3Q2020), and net cash has bulked up to $458 million (against $116 million in 3Q2020), including finance lease. Capital expenditure is around $200 million p.a. against the $350 million pre-pandemic, according to the analyst.

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In light of existing social restrictions and largely closed borders in Singapore, Chew expects muted earnings for 4Q2021. “The transition to New Rail Financing Framework version 2 (NRFF 2) was a disappointment,” says Chew, as he had expected higher cover for the losses experienced in Downtown Line (DTL). “However, the losses are limited to service charge payable and computation of the shortfall was combined or offset with NEL and SPLRT,” he added.

Separately, a planned listing of the Australian subsidiary has been halted due to challenging market conditions as well, according to Chew.

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The analyst noted that the DTL transitioning to NRFF 2 resulted in a net $15 million saving, although the new bus contract extension may lower future operating earnings by $34 million.

At 1:42pm, shares in ComfortDelGro are trading flat at $1.51.

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