ComfortDelGro: More Opportunities To Grow Down Under; Buy, $1.87 - TP $2.33
CD SP | Mkt Cap USD3.1b | ADTV USD8.3m
Maintain BUY and SGD2.33 TP pegged at 18x FY14F PER. Following the
recent market correction, valuations are now below historical average
multiples of 16x PER. With acquisition-led growth driving firm earnings
over the coming quarters, we expect the stock’s valuation to trade
higher.
New South Wales (NSW) Minister for Transport recently announced the
award of new metropolitan bus service contracts. ComfortDelGro’s
Australia bus unit CDCBus again won the contract to operate Region 4.
This effectively removes investors’ earlier fears that CDG could lose
the service contract to this route.
With the majority of the bus transport services still managed by the
state, we believe there is significant scope for privatisation of bus
routes in the future. This would represent a major revenue opportunity
for private operators such as CDCBus. The NSW government has also
stressed the importance of Sydney’s bus network to its public transport
infrastructure and aims to increase bus services to satisfy the growing
demand for bus travel. Hence, with expansion of the bus service market,
we see room for CDG to increase its presence in the region.
Click here for full report derrickheng@maybank-ke.com.sg
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