Here's why it's time to buy into ComfortDelGro

Stock is weak but fundamentally healthy.

According to OCBC, investors should be snapping up ComfortDelGro due to recent positive developments, such as the recent re-awarding by the New South Wales transport ministry of its region 4 contract. The company is also hedged favourably against fuel hikes and rising interest rates, making it a relatively attractive buy.

Here's more from OCBC:

Major NSW region re-awarded. As expected by management, ComfortDelgro (CDG) has been re-awarded the region 4 contract by the New South Wales transport ministry. The contract will be for the next five years with a three year right of renewal subject to performance targets. As this region accounts for more than a third of CDG’s Australian bus contributions, this win should remove any negative overhang for the group’s future in one of its key markets of Australia.

Larger losses versus broad market unwarranted. Despite this positive development, CDG’s share price remains weak, which is unwarranted in our view, given the counter’s promising earnings growth and visibility. Since the release of its 2Q13 results only 15 days ago, the counter has fallen by 9.0% versus a broad market decline of only 5.7% for the FTSE Straits Times Index, and much of the price correction has been due to recent market volatility created by upcoming key events in Sep as well as rising oil prices and anticipated rate hikes. However, with 80% of its fuel requirements hedged at favourable prices for the rest of the year, CDG is not vulnerable to such fuel risks. In addition, with a net cash position, CDG is also unaffected by the potential for rising interest rates.

Smooth remainder of year ahead. With almost three-quarters of the year gone, we expect CDG to continue experiencing revenue growth for its SG operations (bus, rail and taxi) as demand remains healthy and ridership growth decent. Overseas, its Australian and UK bus operations should see slight increments from contributions of recent acquisitions.

Upgrade to BUY. Leaving our FY13 forecasts unchanged, our fair value estimate remains at S$1.95. However, we upgrade CDG to BUY as the recent near-term weakness creates an attractive opportunity for investors to allocate into this fundamentally healthy company with earnings stability.