RHB says be ready to take profit from ComfortDelGro

RHB says be ready to take profit from ComfortDelGro

By: 
PC Lee
03/04/19, 04:25 pm

SINGAPORE (Apr 3): RHB Securities is staying positive on ComfortDelGro’s growth in the public transportation sector but after delivering 21% YTD returns, the stock now seems fairly priced at $2.59.

While CD’s dividend yield of 4% is still above the 10-year bond yield of 2.1%, RHB says this has fallen a tad below the STI’s 4.1% dividend yield.

“We deem it difficult for CD to continue outperforming the STI, as the stock is trading above +1SD from its 5-year mean P/E of 15.4x,” says RHB.

“Investors could consider buying CD again, if the share price drops below $2.50,” adds RHB which should translate into 2% upside with 4% FY19F yield.

In a Wednesday report, analyst Shekhar Jaiswal expects CD’s public transport business to continue to be the key growth driver in the near term – thanks to organic growth in Singapore and contributions from acquisitions in Australia.

While EBIT margins have been on a decline in Australia, CD’s new acquisitions offer margins that are higher than the group’s consolidated EBIT margins of 12-13%.

And with negligible downside risk for its bus business in Singapore, the reduction in losses from its rail business could support higher earnings growth over the next 2-3 years.

CD is also looking to replace older diesel taxis with new hybrid ones, which fetch a higher average daily rental rate vs the taxis that are being phased out.

“This should translate into improved taxi earnings – assuming no sharp rise in competition from ride-hailing players,” says Shekhar adding that Gojek is not expected to have a material impact on CD’s taxi business so far.

At comfortable 30% net gearing, CD could get access to additional $780 million of funding. This compares with $479 million worth of acquisitions it undertook in 2018.

“While we moderate 2019-2021 earnings estimates to account for slower improvement in taxi earnings, we maintain that earnings-accretive acquisitions and higher-than-estimated improvements in its taxi business offer near-term upside risks,” says Shekhar.

As at 4.17pm, shares in CD are trading 2 cents lower at $2.58 or 16 times FY20F.

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....
Read More >>

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....
Read More >>

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....
Read More >>