Wednesday, May 17, 2017

Recent Action - Comfortdelgro

Just wanted to do a quick update on Comfort recent quarter results and also some activities regarding Comfortdelgro in my portfolio.

I bought Comfortdelgro back in Feb at an average price of $2.42 and managed to divest the shares on the 9th May at $2.73 for a profits of 13% (inclusive of dividend). I bought back the same shares back on the 15th May after they announced their results at $2.55, thinking the support would hold. It was breached rather easily and now am getting caught catching a falling knife. Oh well, that's life.

I'll do a quick thoughts on their recent quarterly results.

On paper, net profits are up 12.4% but this was due to one of special dividends of $11.1m from Cabcharge Australia, which the company has acquired the rest of the minority shareholdings in the company.

Overall, we know that operating environment across all sectors have a tough outlook, and this includes the taxi, inspection, automotive engineering service that they operate. Operating profits as a result are down at about 9% yoy. I don't think this comes as a big surprise.

Taxi idle capacity increased from 1% to 3% and this lower rental income brought about the lower revenue due to lower volume of diesel sold to the taxi drivers under the automotive services segment. The inspection service is also down from what we already know from Vicom.

If there's any consolation, it's the increase in bus revenue from the SBS Transit under the new contracting model and the transit rail revenue from higher ridership on the DTL and NEL/LRT and the upcoming new DTL2.

Their concentration of revenue are bigger in UK than in Australia, hence the exchange rate movement of weaker pounds impact them unfavorably.

I think too much emphasis negativity is still being put on the taxi segment. I actually don't think the fall is that significant if we strip out the exchange rate impact.

Not many people noticed but from a cashflow point of view, the company is able to save $20m in a quarter on the capex savings realized due to the contracting model. This sums up to about $80m in a year in maintenance capex alone. From a cashflow point of view, Comfort is actually doing better than what it was a year ago, not taking into account the changes in working capital. 

I am lazy to do an exercise but from a dcf point of view I think it's actually going to be better. One caveat is the taxi segment need to stop falling more drastically which I think they will not. I think we already know how much competition they are out there so I don't think we will suddenly see a surge of car rental fleets all running to uber/grab or other competitors.

From an earnings point of view, they are decently valued at about 16-17x earnings, which is about fair based on their historical average. SMRT gets delisted at 22x PER and peers like MTR in HK or BTS in Thailand are trading at 32x and 25x respectively.

M&A are also always Comfort stronghold wild card which they will always engage as a growing conglomerate. I think this hasn't been fully taken into account and appreciated from investors.


  1. Hi B,
    Thanks for the detail analysis from " cash flow " point of view,,, which is a positive note especially under current tough n challenging biz environment,,, hope the DTL2 would contribute possitively in the bottom line from 2018 onwards,,,:-). With div yield of 4 +% .. I'm eying this counter as well..

    1. not sure if its divd is sustainable. wont be surprise if they cut it

  2. Hi B,

    Good write up on comfort. The next phase of DTL will probably start end of the year and we will definitely see a positive impact to their earnings. Now that comfort is valued decently, it is worth a look

  3. Hi B,

    Been enjoying your blog your insights regarding the Singapore Stock Market. Keep it Up!

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