ComfortDelGro on the road to a stable 2017

SINGAPORE (Jan 16): CIMB Securities continues to rate land transport company ComfortDelGro at “add” with an unchanged target price of $2.91, while forecasting a FY16-18 yield of 3.9-4.7% based on an incremental payout ratio of 66-70%.   

In a note last Thursday, analysts Roy Chen and William Tng say they expect a stable outlook for the stock in the year ahead due to its well-diversified business profile. Factors underpinning this view include:

Government Contracting Model (GCM) benefits
Following the implementation of the GCM, Chen and Tng project a higher EBIT margin of 7% for Singapore’s bus segment under the model, as compared to the 1.6-3% margin under the previous one. They estimate that this will lead to a 54% y-o-y gain in the group’s bus EBIT to $53 million in FY17 from $35 million in FY16.

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