OCBC has maintained its “hold” call on ComfortDelgro but has trimmed its target price to $2.99 from $3.07, following the impending fare reduction that public transport operators here have to conform to.
On Aug 3, the government announced a potential fare reduction of up to 1.9%, effective end of FY15, for a one-year period, to reflect lower oil prices.
“Certainly, the fare cut will have negative impact on ComfortDelGro’s (CDG) near-term growth, at least in FY16, mainly through its 75% exposure in (Singapore bus operations) SBS Transit and as the operator for Downtown Line (DTL) in Singapore,” states OCBC in a Sept 7 note.
However, ComfortDelgro has built up a diversified revenue base that includes significant overseas operations in countries like UK and Australia. So, the potential fare cut will have marginal impact on the company, which generates 59% of its revenue from within Singapore in FY14, adds OCBC.
Going forward, there will be new revenue contribution when the next phase of the Downtown Line begins operations. There is also the transition to a new operating model for buses where operators like ComfortDelgro are paid a fixed fee by the government.
Meanwhile, before further details of these new developments are announced, OCBC is penning in a “worst-case scenario” of a fare reduction of 1.9%, which is seen to result in a 2% trim in the company’s PATMI for FY16.
As at 10.16am, ComfortDelgro was down 4 cents to trade at $2.76.
Click Here To Register For Free Trial Services OR Give A Missed Call : +6531581402 Follow Us On Twitter : www.twitter.com/epicresearchsg Like Us On Facebook : www.facebook.com/EpicResearchSingapore Need Any Assistance Feel Free To Mail Us at : info@epicresearch.sg
On Aug 3, the government announced a potential fare reduction of up to 1.9%, effective end of FY15, for a one-year period, to reflect lower oil prices.
“Certainly, the fare cut will have negative impact on ComfortDelGro’s (CDG) near-term growth, at least in FY16, mainly through its 75% exposure in (Singapore bus operations) SBS Transit and as the operator for Downtown Line (DTL) in Singapore,” states OCBC in a Sept 7 note.
However, ComfortDelgro has built up a diversified revenue base that includes significant overseas operations in countries like UK and Australia. So, the potential fare cut will have marginal impact on the company, which generates 59% of its revenue from within Singapore in FY14, adds OCBC.
Going forward, there will be new revenue contribution when the next phase of the Downtown Line begins operations. There is also the transition to a new operating model for buses where operators like ComfortDelgro are paid a fixed fee by the government.
Meanwhile, before further details of these new developments are announced, OCBC is penning in a “worst-case scenario” of a fare reduction of 1.9%, which is seen to result in a 2% trim in the company’s PATMI for FY16.
As at 10.16am, ComfortDelgro was down 4 cents to trade at $2.76.
Click Here To Register For Free Trial Services OR Give A Missed Call : +6531581402 Follow Us On Twitter : www.twitter.com/epicresearchsg Like Us On Facebook : www.facebook.com/EpicResearchSingapore Need Any Assistance Feel Free To Mail Us at : info@epicresearch.sg
0 comments:
Post a Comment