'Buy' calls around for ComfortDelGro as it drives towards a bright outlook

Majority analysts driving towards a 'buy' for ComfortDelGro as it has a smooth journey ahead and also for its positive outlook, as they see a recovery underway and while the group is positioned to benefit from the electric vehicle (EV) boom.

For the FY2021 period, earnings surged some 114% y-o-y to $130.1 million, but the 2HFY2021 period experienced a 42% y-o-y decline to $39.1 million.
The earnings growth in FY2021 was mainly due to higher revenue, as well as higher net income from investments. The earnings decline in 2HFY2021 however was mainly due to significantly lower Covid-19 government reliefs and lower net income from investments.

ComfortDelGro is currently experiencing high vaccination rates, lower taxi rebates, higher rail ridership in Singapore, and increased charter activities in UK/Australia as tourism recovers. Thus, this should aid further recovery in social mobility.

Meanwhile, management has said that taxi driver incomes in Singapore have been holding up well with reliefs granted by the government and CDG. With the recent improvements in social mobility and fare hike announcements, CDG has received more enquiry from drivers looking to rejoin the fleet.

With fuel prices increasing lately, CDG will see minimal impact on its financials, as CDG’s public bus packages have fuel indexation and other cost factors built into the compensation formula.

We believe CDG’s current share price has already priced in the near-term negatives, and the current share price weakness offers a buying opportunity. On the other hand, DBS Group Research is also reiterating its “buy” recommendation on CDG with a lower target price of $1.95 from $2.06 previously.

The group is expected to be a major beneficiary of the local economy reopening, as mobility gradually trends towards normalisation. The group has also embarked on multiple initiatives to green its business segments. It has invested in green projects that include the provision of EV charging infrastructure and a greening of its bus and taxi fleet which could potentially pave the way for inclusion in ESG indices.

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