SINGAPORE (Nov 14): ComfortDelgro’s share price fell more than 12% over the past month, in what Maybank Kim Eng considers an “overreaction” to the announcement of a 4.2% fare cut on Oct 27 from lower energy prices.

Maybank Kim Eng’s analysts Derrick Heng and John Cheong noted that the Public Transport Council has guided for an $8.9 million impact on SBS Transit’s rail operations, which is “manageable”.

They also added that the “cost relief from a broader deflationary environment should mitigate the downside to earnings.”

In addition, CDG’s bus operations are already on a fare-independent model that is unaffected by the fare cuts, said the pair, whileadding that CDG’s shares still offer a dividend yield of 4.4% at current levels.

To that end, the brokerage has maintained its hold rating on the transport operator with an unchanged target price of $2.63.

The group posted a 3% decrease in revenue for 3QFY16 which Maybank Kim Eng attributed to unfavourable foreign exchange movements.

Earnings were also impacted by a $3.8 million non-recurring charge from the group’s earlier bid for the London Underground.

More importantly, the group’s taxi operations appear to be resilient despite growing competition, as Heng and Cheong pointed out that Singapore earnings were boosted by health fleet renewals, higher proportions of cashless transactions and improvements in cost control.

Shares in ComfortDelgro are trading 3 cents lower at $2.43.

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