ComfortDelGro share price hits 2-year low amid soft analyst estimates

Analysts across the board have lowered their earnings and share price predictions for the transport group, citing ‘significant impact’ from COVID-19.

Singapore’s largest taxi operator ComfortDelGro Corporation Limited's share price has fallen nearly 9% since it reported its full-year results for the 2019 financial year.

Shareholder dividend cut by 14%

The group, which has land transport operations in Singapore, the UK, Australia, China, Vietnam, and Malaysia, saw its FY2019 net profit attributable to shareholders drop by 12.6% or S$38.2 million to S$265.1 million.

The lower profit was attributed to higher group operating costs of 3.7% to S$3.5 billion, due in part to the expansion in business but also a S$27.3 million impairment of its taxi business.

Final tax exempt one-tier dividend for FY2019 was also cut by 14% to S$0.529 per share, versus S$0.615 in the year before.

Prior to the release of its results on 14 February, ComfortDelGro stocks were trading at S$2.18 per share. As of 11.55am on 24 February, share price stands at S$1.99 apiece.

‘Public transport earnings collapsed’

A deeper probe into the results showed that much of the weaker earnings can be traced back to the public transport segment’s weaker-than-expected performance.

As Philip Securities Research’s Paul Chew noted, ‘the biggest disappointment was the 44% in earnings at the public transport division (bus and rail)’ in the last fiscal quarter.

While profit margins ‘were expected to narrow’ due to higher rail repairs and maintenance costs, Chew said the decline ‘was more pronounced than expected’.

Public transport recorded a revenue of S$744.3 million in Q4 FY2019, flat against Q4 FY2018. Operating profit for the segment was down year-on-year due to a licence charge for Singapore railway network, Downtown Line.

Furthermore, the line grew its average daily ridership by a ‘tepid 6% year-on-year to 477,000 in 2019’, according to UOB Kay Hian researcher Lucas Teng.

He added that business is ‘still tough for Downtown Line’, with higher maintenance costs associated with the ongoing North East Line and Light Rail Transit fleet’s ‘mid-life refurbishment’ and staff salaries still to come.

Trade ComfortDelGro stocks and more by signing up for an IG account today.

Company’s outlook for FY2020; COVID-19 thoughts

The company provided the following guidance for the 2020 financial year in a press release:

‘The COVID-19 outbreak broke out in Wuhan, China in December 2019 and quickly spread internationally despite efforts to contain it. How the outbreak will turn out is currently unclear and a prolonged outbreak is anticipated. COVID-19 and measures to fight it will result in the economic slowdown of affected countries.

‘Our taxi, public transport and transport related businesses are witnessing lower ridership and volumes as we face significant operational challenges. Notwithstanding the current uncertainties, the group maintains its long-term focus on the mobility strategy and continues to transform and build capabilities.’

Lower share price and earnings predictions from analysts

Following that guidance, analysts from DBS Vickers, OCBC Investment, Phillip Securities, and UOB Kay Hian have lowered their share price and earnings predictions for the transport group.

OCBC’s research team lowered their share price targets (fair value estimates) to S$2.70 per share from S$2.91 previously, citing a ‘significant impact’ from the coronavirus epidemic to the taxi and rail business.

Teng from UOB cut his earnings estimates by 5.5% for FY2020/2021, on the back of two COVID-19 related factors: a three-month taxi hirer rental rebate programme to help cushion the fall in passenger volume during this period that will costs about S$9 million in all; as well as lower ridership for Downtown Line.

He also lowered his share price target to S$2.15 per share from S$2.27 previously. He estimated entry price to be S$1.95 and a ‘hold’ rating with a long-term forward price-to-earnings (P/E) ratio of 16.7. ComfortDelGro shares currently have a P/E ratio of 16.27.

Phillip Securities has cut its FY20 earnings estimates by 16% on account of expected weaker traffic, higher taxi rental rebates, and disruption to the company’s China operations. It maintained its ‘accumulate’ recommendation with a lower price target of S$2.20 per share from S$2.56.

Finally, DBS Vickers’ Andy Sim also lowered his forecast for the company’s FY2020 and FY2021 earnings by 6.2% and 4.8% respectively.

He added that dividends per share (DPS) ‘could trend lower in FY20F before reverting up in FY21F’. For now, his team projects this financial year’s DPS to move down to S$0.96 per share, versus S$0.107 per share previously. They have downgraded their stock rating to ‘hold’ on a lower share price prediction of S$2.26 (from S$2.45 previously).

Go long or short on ComfortDelGro stocks via IG's industry-leading trading platform.


This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Seize a share opportunity today

Go long or short on thousands of international stocks.

  • Increase your market exposure with leverage
  • Get spreads from just 0.1% on major global shares
  • Trade CFDs straight into order books with direct market access

See opportunity on a stock?

Don’t miss your chance. Try a risk-free trade in your demo account, and find out whether your hunch could have paid off.

  • Log in to your demo
  • Try a risk-free trade
  • See whether your hunch pays off

See opportunity on a stock?

Don’t miss your chance. Upgrade to a live account to take advantage.

  • Trade a wide range of popular global stocks
  • Analyse and deal seamlessly on fast, intuitive charts
  • See and react to breaking news in-platform, when it matters

See opportunity on a stock?

Don’t miss your chance. Log in to take advantage while conditions prevail.

Live prices on most popular markets

  • Forex
  • Shares
  • Indices
Sell
Buy
-
-
-
-
-
-
-
-
-
-
Sell
Buy
Sell
Buy
-
-
China 300
-
-

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

Plan your trading week

Get the week’s market-moving news sent directly to your inbox every Sunday. The Week Ahead gives you a full calendar of upcoming economic events, as well as commentary from our expert analysts on the key markets to watch.


For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of spread betting and CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.

Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money. Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.