OCBC raises ComfortDelGro's fair value estimate amid expectations of smoother ride ahead

OCBC raises ComfortDelGro's fair value estimate amid expectations of smoother ride ahead

Stanislaus Jude Chan
17/04/19, 02:58 pm

SINGAPORE (Apr 17): OCBC Investment Research is keeping its “hold” call on ComfortDelGro (CDG), but raising its fair value estimate to $2.63 from $2.38 on the back of improved market sentiment for the public transport operator.

Analyst Low Pei Han notes that the share price of CDG’s 74.5%-owned subsidiary SBS Transit has climbed around 56% year-to-date.

She adds that this has been supported by earnings growth with the contributions from the Seletar and Bukit Merah Bus Packages, which commenced operations from March and November 2018, respectively.

“As a comparison, SBS’s net profit was $80 million versus CDG’s $303 million in FY18, while SBS’s net profit was $47 million versus CDG’s $302m in FY17,” Low says, noting that SBS now accounts for around 20% of CDG’s net profit.

Meanwhile, CDG is also expected to be lifted pending conclusions to the government’s earlier consultation paper on changes to regulations for the point-to-point (P2P) transport sector, which closed nearly two months ago on Feb 21.

“There are expectations that a new regulatory framework for the P2P transport sector will be established, given the current sheer size of the private hire sector. For instance, regulatory scrutiny of the private hire industry may be increased, levelling the playing field for taxi operators,” says Low.

According to data from the Land Transport Authority (LTA), Singapore’s taxi fleet has fallen 10% y-o-y to 20,256 as at February 2019, with CDG commanding a share of around 60%.

In contrast, the number of private hire cars stood at 67,788 as at February 2019, relatively unchanged from a year ago, Low notes.

As at 2.56pm, shares in ComfortDelGro are trading flat at $2.61, implying an estimated price-to-earnings (PE) ratio of 17.7 times and a dividend yield of 4.0% for FY19.

US sanctions on Huawei could backfire

SINGAPORE (May 27): It was only to have been expected. After nearly a year of pressure that failed to stop Huawei Technologies Co’s expansion -- especially in the rollout of the next generation 5G wireless network globally -- in its tracks, US President Donald Trump signed an executive order effectively barring American firms from doing business with the Chinese telecommunications equipment company. The inclusion of Huawei on the US Department of Commerce’s Bureau of Industry and Security’s (BIS) Entity List means that companies would need to apply for a waiver to supply goods with 25....

Annica chairman Ong quits just as $33 mil goes missing at his law firm JLC

SINGAPORE (May 27): Jeffrey Ong, managing partner of law firm JLC Advisors, may have given instructions to pay out a sum of $33.2 million held in escrow by his firm for a client, Allied Technologies. According to Allied’s statement filed with Singapore Exchange on May 23, the payment may have been “unauthorised”, citing a letter it received from JLC on May 22. Allied’s statement did not specify who the payment was made to. Ong also abruptly resigned as non-executive chairman of Annica Holdings on May 20. In a May 22 filing with SGX, Annica CEO Sandra Liz Hon Ai Ling said Ong resigne....

SGX RegCo sees targeted approach in enforcement, more powerful market discipline

SINGAPORE (May 27): Tan Boon Gin, CEO of stock exchange regulator Singapore Exchange Regulation, says the market can expect a stronger regulatory presence. “You will see a series of enforcement cases coming up quite soon,” he tells The Edge Singapore. Tan’s assertion comes amid significant changes in the market as sentiment remains lacklustre and investors’ expectations change. The local stock market has gone through significant upheaval, not least because of the penny stock crash in 2013 that wiped out some $8 billion in value from the market. The event dented investor sentiment, a....