ComfortDelgro kept at ‘buy’ by UOB; special dividend expected

SINGAPORE (July 1): UOB Kay Hian has maintained its “buy” recommendation and target price of $3.16 for ComfortDelgro (CD), adding that it expects limited impact from Brexit on its UK transport operations.

According to UOB’s estimates, CD’s UK business account for 25% of group revenue, and 19% of operating profit. Within the UK business, about 88% to 90% of revenue and 97% to 98% of operating profit comes from its bus operations, with the rest coming from its taxi business.

UOB Kay Hian analysts Andrew Chow and Thai Wei Ying observed that the majority of CD’s UK bus business comes from London Bus company Metroline, which operates under the London Bus Quality Incentive Contract (QIC) model. Under the QIC model, fare revenue is kept by the government, while bus operators are paid to provide services and are rewarded based on their reliability.

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