ComfortDelGro eyeing more overseas acquisitions after steady Q1 results

Its low leverage will come in handy.

ComfortDelGro's strong appetite for overseas acquisitions is fuelled by its low leverage and steady first-quarter results.

CIMB analysts Roy Chen and William Tng note that prospective overseas mergers and acquisitions will be backed by CDG's strong net cash of $153m and the potential net proceeds from the bus sale, which is estimated at $280m.

"Based on the low-teens ROE of CDG’s existing overseas businesses, every S$100m equity investment could lead to around $13m gain in earnings, equivalent to around 5% FY14 net profit. Management said there have been negotiations ongoing in the UK and Australia for suitable acquisitions," they stated.

Maybank Kim Eng analyst Derrick Heng said that CDG's low gearing will support its appetite for acquisitions, and future deals could alter its return on equity outlook.

"While opportunities are aplenty, management remains committed to negotiating for good prices. A sizeable acquisition at attractive valuations could alter its ROE outlook, providing upside to our forecasts," he said.