ComfortDelgro's bus and taxi outperform but rail disappoints

Rail EBIT plunged 63% YoY.

Nomura notes that the bus segment outperformed expectations on the EBIT level as it saw strong growth coming in from the UK (up 6% y-y) and lower-than-
expected losses in Singapore (down 7% y-y) as well-placed fuel hedges helped achieve lower fuel cost.

Taxi segment EBIT was also above expectations (up 8% y-y) as it saw strong growth from Singapore (up 15% y-y) driven by growth in cashless
transactions and fleet size expansion, extension and replacement, said Nomura.

However, rail EBIT was disappointing (down 63% y-y) as profits were eroded by higher repair & maintenance cost to ensure service reliability and start-up cost for the Downtown Line (S$1.9mn for 3QFY12), it added.

What do the results mean?

Here's from Nomura:

The results show that the group is capable of achieving growth even in the face of a tough operating environment, thanks to strong operating capabilities and a diversified earnings base. However, we think it is very possible that start-up costs from the Downtown Line (DTL) will continue to be a drag on earnings in the short run.

On a q-q basis, management has reduced its revenue expectation for the Australian bus business, from “increase” to “maintain”. Separately, management continues to expect higher revenue from the Singapore bus, rail, taxi, driving centre and vehicle inspection & testing business, Australia bus business and the group’s rail business.

4QFY12 margins should be comparable to 3QFY12 margins as the group is 90% hedged at relatively attractive levels for the rest of the year. The company expects cost associated with the DTL to continue increasing towards the commencement of operations in end-2013.

Key numbers:
CD group posted a 5.4% y-y increase in 3Q12 net profit to S$73mn, on the back of a 2.7% increase in revenues to S$901mn. Higher automotive engineering and taxi profits led EBIT growth across all segments, with the exception of the rail business which saw y-y decline of 63%. The overseas divisions accounted for 40.6% of group revenue and 47.3% of group operating profit, slightly lower on a y-y basis (42.0%, 47.8%, respectively)