ComfortDelGro to face intense pressures overseas

All eyes on Sydney, New South Wales and China.

According to OCBC, ComfortDelGro (CD) should end the year on a good note given the manageable operating expenses. However, going forward, the Group will face some competitive pressures in certain markets.

Here's more from OCBC:

For instance, bus routes in Sydney, New South Wales are now open to competitive bids and the Group has since lost bids on routes in two existing regions.

Similarly, CD had recently announced a taxiJV in Guangzhou but contributions to operating profit could take a little longer with the unique regulatory environment.

3Q12 results exceed expectations
ComfortDelgro Corporation Limited’s (CD) 3Q12 results exceeded our and consensus estimates. Although revenue came in within 1% and 2.8% of the respective estimates to S$900.8m (+2.7% YoY) on the back of higher ridership figures, a smaller than expected increase in operating expenses saw operating profit improve by 2.8% YoY to S$116.8m.

PATMI correspondingly rose 5.4% YoY to S$72.8m, which exceeded our and the street’s forecasts by 17.4% and 13.9% respectively.

Pressures on operating expenses manageable
Despite an uptick in operating expenses (+2.7% YoY to S$784m), CD's operating margin for the quarter remained stable at 13% from a year ago.

While the bulk of the increases were related to higher staff costs and greater emphasis on repair and maintenance works - and looks set to continue with additional headcount required for the Downtown Line - CD's fuel hedges for its diesel and electricity needs in 4Q12 and FY13 will help to offset some of these increases.