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ComfortDelGro’s EV charging points business should generate high margins, but will take a few years: RHB

Atiqah Mokhtar
Atiqah Mokhtar9/6/2021 05:30 PM GMT+08  • 2 min read
ComfortDelGro’s EV charging points business should generate high margins, but will take a few years: RHB
RHB views the business will take time to turn profitable as Singapore’s EV adoption is still in its early stages.
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RHB Group Research analyst Shekhar Jaiswal has kept his “buy” call and target price of $2.03 for ComfortDelGro (CDG) Corporation unchanged after the company announced it had jointly won a pilot tender to set up 470 electric vehicle (EV) charging points in Singapore.

See: ComfortDelGro-ENGIE consortium wins tender for EV charging points in Central, East and West regions

CDG has a 51% stake in a consortium with ENGIE South East Asia for the project. The charging points will be installed in Singapore public car parks over the next 12 months and must be operational by 3Q2022.

In a Sept 6 research note, Jaiswal notes that the business should generate high EBIT margin, though it may take some time before that happens. He points out that CDG will incur $5-6 million in capital expenditure to deploy the EV charging points, and will also have to pay a concession fee to the government for the right to install and operate the EV charging points.

“CDG could make high single-digit to low double-digit EBIT margin for this business. However, as revenue will be driven by greater adoption of EV in Singapore, we believe the business could take a few years before turning a profit as Singapore’s EV adoption is still in its early stages,” he says.

Nonetheless, he remains optimistic on CDG’s prospects in the nearer term. "We maintain our investment thesis of CDG’s earnings to recover and expect the key re-rating catalysts to play out over the next 12 months,” he says.

Re-rating catalysts include an improvement in operating metrics for CGD’s public transport and taxi businesses as Singapore gradually reopens the domestic economy, as well as a higher inflow of international travellers in 2022.

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Jaiswal expects the recovery in CDG’s overseas businesses in Australia and the UK to be visible in its 2H2021 earnings performance. IPO of its business in Australia could also be a re-rating catalyst.

“While the timing remains uncertain, favourable changes to the Downtown Line’s financing framework could bring about a material upside risk to earnings,” he adds.

Shares in CDG closed up 3 cents or 1.89% higher at $1.62 on Sept 6.

Photo: CDG

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