KIM ENG - An elephant at home, A horse abroad

♦ Continued growth momentum from 1H07

ComfortDelgro (CD) 3Q07 results continued its growth momentum from 1H07. Year to date, revenue, operating profit and net profit had increased 7.9%, 11.2% and 12% respectively. Unsurprisingly, overseas operations continued to drive growth.

♦ An elephant at home, a horse abroad

While Singapore-derived revenue increased $34.8m (+3% Y/Y) in 9M07, overseas-derived revenue increased $126.2m (+14.1% Y/Y).Similarly, while Singapore-derived operating profit increased $4.7m (+3.4% Y/Y), overseas derived operating profit increased $21.1m (+22.4% Y/Y).

♦ Rail operations ? the domestic star performer

Domestically, rail operations was the star performer. 9M07 rail revenue increased 21%, tracking the increase in rail ridership of about 20%. Consequently, rail had reversed from an operating loss of $1.8m in 9M06 to a profit of $6.9m in 9M07.

♦ Domestic bus and taxi businesses outshine by rail

SBS Transit bus business continued to face cost pressure. Though revenue increased from higher ridership, 9M07 operating profit declined Y/Y from higher repair and maintenance, depreciation and staff costs. The situation should improve however, with increased ridership. Operating profit from domestic taxi business in 9M07 improved slightly, by $2.2m, as higher rental charged on the new Sonata fleet and more billings to corporate accounts offset an increase in taxi drivers? benefits.

♦ Overseas provide opportunities for organic and inorganic growth

CD?s businesses in its 3 main overseas markets: UK, China and Australiacontinued to flourish. Growth was perpetuated by organic business developments such as increasing taxi fleet size andcontract rate adjustments in the bus business and by recent acquisitions in all 3 countries.

♦ Target price reduced to $1.86, Maintain HOLD

We are maintaining our forecasts but have reduced our target price as sector valuation on the whole has declined. Valuing FY08 EPS at 15x PER,we obtained a fair value target price of $1.86. Maintain HOLD.

·        Revenue rose by 6.3% to $771.4 million due to strong overseas contributions

o       Overseas turnover accounted for close to 48% of total Group turnover, up from 44% previously

o       Turnover from overseas bus operations now accounts for close to 63% of total bus turnover

o       Turnover from overseas taxi operations now accounts for close to 39% of total taxi turnover

o       Turnover from rail operations increased by 20% to $22.8 million due to strong ridership growth

·        Overseas operating profit accounted for 52% of total Group operating profit Net profit increased by 15% to $59 million