ComfortDelGro's Q3 profit rises 5.3%

Singapore

BOOSTED by a broad-based increase in revenue, land transport giant ComfortDelGro reported a net profit of S$80.8 million for the three months ended Sept 30, 2014, up 5.3 per cent from S$76.7 million a year ago. Revenue grew 6 per cent to S$1.04 billion, from S$978.4 million a year ago.

"The results are in-line . . . they are boringly good, that's what we want," DBS Group Research analyst Andy Sim told The Business Times.

For the first nine months of the year, revenue was up 9 per cent to S$3 billion, while net profit rose 8.1 per cent to S$219.8 million.

Nine-month net profit numbers formed between about 78 to 79 per cent of full-year net profit forecasts of CIMB, OCBC and DBS analysts. They are also expecting an average net profit growth of 5 per cent in 2015.

Considering these forecasts, the company is currently trading at 20 times expected 2014 earnings and 19 times expected 2015 earnings.

The company is one of Deutsche Bank's "top five buy picks" for 2015. Analyst Joe Liew said in a recent note that he was bullish on the company's overseas growth prospects and acquisition potential. He said that Singapore bus contracting model reforms, slated for 2016, will also improve earnings.

But a sharp increase in the company's valuations in the last six months had led some analysts to argue that the firm's growth was already priced in.

In the third quarter, most segments at ComfortDelGro reported increased revenue, including the critical Singapore (+11.5 per cent to S$204 million) and UK (+12.4 per cent to S$224 million) bus businesses and the Singapore taxi business (+8.7 per cent to S$247 million).

Higher revenue from the UK and Singapore bus businesses more than offset a decline in Australia. Looking ahead, the firm said that higher Singapore bus ridership and higher fares will boost revenues. UK bus revenue is expected to increase with newly acquired routes and service enhancements.

The Singapore taxi segment reported higher revenue because of a larger fleet, higher rental income after taxis were replaced, and a higher volume of cashless transactions. New replacement taxis, which cost more to rent, are expected to increase revenues.

For the third quarter, operating profit for the taxi business inched up from S$42.1 million to S$43 million. But operating profit for the bus segment fell from S$51 million to S$45.4 million. This was probably due to the expected decline in Australia bus operations after some bus contracts were lost, DBS' Mr Sim said.

ComfortDelGro said cost pressures will continue to be felt throughout the group. Operating expenses for the quarter rose 6.7 per cent, or S$57 million, to S$913.4 million. This was mainly due to higher staff costs, higher payments for contract services, and higher fuel and electricity costs.

The company traded at S$2.62 a share, higher by a cent, before results were announced.