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CGS CIMB |
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ComfortDelGro Bumpy road ahead
■ ComfortDelGro (CD) announced more rental relief for its taxi drivers, in a bid to stabilise its taxi fleet as cabbies are finding it difficult to make ends meet. ■ This will push CD’s SG taxi business into the red for FY20F. We also expect earnings hits at its UK and Australia units due to the lockdowns imposed. ■ Reiterate Hold, with a lower TP of S$1.55. CD trades at 12.5x FY21F P/E, 1 s.d. below historical mean (13.1x), pricing in the Covid-19 impact, in our view.
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REIT Retail: Negative impact from new measures
■ The Singapore government has issued an advisory urging Singaporeans to avoid making any non-essential visits to malls and supermarkets. ■ We estimate 12-19% FY20F DPU impact from 2 months’ rent rebate to 90% of tenants and loss of 90% variable income until year-end (9 months’ impact). ■ Prefer Sheng Siong, which could be a beneficiary when people stay at home.
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| DBS VICKERS | UOB KAYHIAN |
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ComfortDelGro
Further rebates to push taxi into the red Further drag from taxi rental rebates, cut to TP; valuations seem low but uncertainties prevail. With increasing taxi rental rebates and prompts by the authorities for social distancing to combat the spread of COVID-19, ComfortDelGro (CD) has warned that its taxi operations could slip into losses for the year. The group has indicated that it will match the Government’s Special Relief Fund (SRF) till Sep 2020 of S$10/day/taxi as well as extend its S$26.50 rebate till then, which is estimated to cost about S$80m. After the c.38% share price retreat YTD, the stock is trading at 12.5x FY21F PE (c.-1.5 SD below average) and may have priced in the dire outlook, but there are limited re-rating catalysts at this juncture. Maintain HOLD, TP lowered to S$1.55. The situation remains fluid, and we are looking for an easing of the current situation before turning positive.
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Z-Score: A Testing Time For Singapore Stocks
A “black swan” event such as COVID-19 presents a testing time for Singapore stocks. We use Altman’s Z-score to look at companies at the bottom of the scale to see which of them face challenges, but conclude that while many appear to be in distress, insolvency is not a key risk due to strong balance sheets, decent interest coverage ratios and well-capitalised major shareholders. We continue to prefer high-yield stocks in the financial sector, telcos and selected REIT segments.
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