Skip to main content

Analysis of ComfortDelgro - Update 2


Based on the 3rd Quarter FY17 results, net profit decreased by ~ 8% Q-o-Q to 3.7cents. 

Including the 0.04 special dividends of CabCharge Australia, 9MFY17 EPS is now 11.2cents. So if we estimate EPS of 3cents for 4QFY17, FY17 EPS will be 14.2 cents. This is just slightly lower than FY16 EPS of 14.72cents. Give 4QFY16 EPS of 3.3cents, if we assume another 8% loss, we will get about 3 cents for 4QFY17. But the final number may be potentially slightly higher cos of the new Downtown Line 3 that started operations in October. So we have about 2 months of income there. 

At 14.2 cents, at PE of 13x (undervalue based on historical PE range), price should be about $1.846. 

If all things remain, which means the one or more of the followings:
  • Grab stagnated at pulling market share,
  • higher revenue from bus and trains, and
  • no exceptional gains, 
we could expect future EPS to be about 0.9*14.72= 13.25 to 14.2-04=13.8. 

Taking the lower conservative value, we take EPS at 13.25. at 13x PE, $1.72 will be considered undervalued. 15x is about fair value at $1.99. 

Given that they are spending about 60% of their cash reserve to buy LCR, I actually hope they cut dividends a little more to restore that cash reserve for rainy days. 

How I see things.. Grab and Uber will be software / application focused. Comfort, taxi companies will be fleet management. Revenue sharing between these two types of companies will be necessary for both to survive. Ultimately, there will be price reversion for consumers to pay whatever is the fair price for transportation. 

If CDG can successfully turn around LCR, it may not be a bad thing. Although, there is risk that Uber may give up SEA completely to focus on USA. And this while be bad for CDG if Grab and SMRT alliance strengthen in the meantime. In the ideal world, if only CDG had linked up with Grab, but in that scenario, Grab may play the upper hand and force more revenue share from CDG.  

Anyway, given these potential risk, I believe getting in at $1.85 will provide a higher margin of safety (compared to $1.95) and I can buy more if it does fall to $1.72. 

From the TA point of view, there seems to be some divergence between price and RSI at $1.91. So potentially there could be a short term rebound to $2.10-$2.20 perhaps. Thereafter, there might still be some room to fall for the sudden last plunge or the nice curve bottom. 

So this shall be a test of my patience, to wait for $1.85. If I miss it, I will just need to look for a better and more compelling investment opportunity. 

Comments

Post a Comment

Popular posts from this blog

My Experiences with Bear Markets, Market Corrections and Panics

Even though I know that bear markets, market correction and panic are some the best times to buy stocks, I realized each time that it has happened, I have failed to maximize my opportunities.  Take for instance the GFC in 2008. I did one good thing by buying DBS at the low of $5+. And we did well on that after it issued a 2 for 1 rights call. I did not do any FA or TA on DBS, I just knew that it's a core economic function of Singapore, there is no way the government will let DBS fail. The mistake I made was selling it off too early after it hit $16+. Had I kept it all the way now, the returns would be a lot greater if I added in the dividends received. At that point, I did not understand of beauty of dividends in boosting your overall returns.  On looking back, what was worse was that I did not empty my war chest to capitalize on the GFC. I was certainly not financial savvy at all. In fact, I was sort of freaked out by the 50% or more crash in the prices of the stock ...
Post a Comment
Read more

About

This is a blog to keep me disciplined in my investment process. I am committed to doing a thorough analysis of potential investments and documenting my thoughts and analysis here to guide me to make better investment decisions. This is not a blog to tell you what to buy or invest in. But rather, I hope through my sharing, I can share my knowledge and learning about investments. I enjoy investing because I like to read and learn. My ideal job is one that pays me to read, learn and understand the world better. Why is it that some business are better than others? Why is it that some work have so much higher returns than others? What will be the key driver of economic progress of the world moving forward? How will the world look like 50 years down the road? I found it interesting that through reading books about investing like Jim Roger's Hot Commodities and Ruchir Sharma's Breakout nations, I get to learn about the things that I am interested in and also understand why cer...
Post a Comment
Read more