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Hot stock: ComfortDelGro skids 3.4% on missed Q3 earnings

SHARES in ComfortDelGro shed more than 3 per cent on Thursday, after the transport behemoth posted a 10.8 per cent fall in third-quarter net profit to S$70 million overnight, as a deflating taxi business took a toll on earnings. 

As at 4.17pm, the counter was down 3.4 per cent, or eight Singapore cents to S$2.30. Some 19.2 million shares changed hands, making it one of the most heavily traded counters on the Singapore bourse for the day. 

Across the board, analysts seem to agree that ComfortDelGro's earnings for the fiscal third-quarter came in below expectations, and have lowered their target price (TP) for the counter accordingly. 

DBS Group Research has maintained its "hold" rating on the stock with a lower TP of S$2.48 from S$2.59 previously, citing that the group's Q3 profit was "underwhelming", with higher operating expenses and taxes, along with a contraction in taxi revenues. 

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Said DBS analyst Andy Sim: "We trimmed FY19F-20F (full-year forecast for fiscal 2019-2020) earnings by 7 per cent each year, and now expect outlook to remain subdued with 3 per cent/1 per cent earnings growth in FY20F/21F."

Similarly, CGS-CIMB has downgraded its recommendation on the counter from "add" to "hold", with a lower TP of S$2.28 from S$2.78, after taking into account a weaker earnings growth outlook. 

CGS-CIMB analyst Cezzane See added that commencement of the group's Downtown Line (DTL) licence charge payment to the Land Transport Authority could hurt its public transport margins for FY20F, and that competition in the taxi segment remains keen. 

Also downgrading its rating for the transport operator on Thursday was UOB Kay Hian, which issued a "hold" call on the stock, with a reduced TP of S$2.27, versus S$2.95 from before. 

UOB Kay Hian analyst Lucas Teng noted that the group is "facing headwinds in rail and taxi", and that the "negative surprise" in its Q3 earnings came mainly from the fixed licence charge payable for the DTL, which led to a rise in operational cost. 

"The taxi front continues to be tough, impacted by a smaller fleet size, and incentives to retain drivers," Mr Teng explained. 

Meanwhile, Maybank Kim Eng is more optimistic and has maintained its "buy" call on ComfortDelGro, though the brokerage has also lowered its TP on the counter slightly to S$2.70, from S$2.76 previously. 

"Despite margin pressure, we continue to anticipate profit growth to be driven by public transport service (bus and rail) revenues. This will come from a combination of local fare hikes, and improvements in existing overseas ventures," Maybank Kim Eng said.