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Valuation Case Study on
Comfort Delgro
Valuation Case Study on
Comfort Delgro
Disclaimer and Declaration
The objective of the presentation is for educationalpurposes. The full content of the presentation is forillustration purposes only and should not be used as
investment recommendations. AB Maximus and itspresenters are not responsible for all investment activitiesconducted by the participants and cannot be held liablefor any investment loss.
The company and presenters may have personal interestin the particular shares presented.
Agenda
1)Company Background 2)Industry Overview 3)Valuation 4)Risk
Company Background
ComfortDelGro Corporation Limited provides bus, taxi, car leasing and rental, automotive
engineering, maintenance services, and diesel sales. The Group also provides investment trading and operates vehicle inspection and
assessment services, and advertising services. The group operates locally as well as
internationally in 6 other countries.
Company Background
Source: Company’s Annual Report 2012
59.3% 19.2% 13.9% 7.3% 0.2% 0.1%
Company Background
Source: Company’s Annual Report 2012
�Group Revenue and Profits
2009 2010 2011 2012
-2.2% 5.1% 6.4% 3.9%
2009 2010 2011 2012
9.7% 4.1% 3.1% 5.6%
Growth rates
Company Background
Source: Company’s Annual Report 2012
2009 2010 2011 2012
9.4% 4.8% 2.7% 5.3%
2009 2010 2011 2012
8.4% 6.7% 5.0% 5.3%
Company Background
Source: Company’s Annual Report 2012
2009 2010 2011 2012
Growth 6.0% 3.8% 9.1% 6.7%
Year-end Price 1.64 1.55 1.41 1.78
Yield 3.2% 3.5% 4.3% 3.6%
Company Background
Source: Company’s Annual Report 2012
2008 2009 2010 2011 2012
52.1% 50.5% 50.0% 53.1% 53.8%
Dividend payout ratio:
Company Background
Source: Company’s Annual Report 2012
Operating profits in line with revenue. Bus and taxi segment most important.
Company Background
Source: Company’s Annual Report 2012
Sg and Australia important geographical segments
Company Background
�Company disclosure 2012:
Source: Company’s full year Report 2012 presentation slides
Company Background
�Company disclosure 2013:
Source: Company’s Q1 Report 2013 presentation slides
Industry Overview
�Transportation industry:
Characteristic:
�Highly Regulated
�Inelastic demand
Factors favoring Comfort growth:
�Population growth
�Economic growth
�Favorable govt regulation
Industry Overview
� Growth Assumption
• Comfort expected to grow 6% comfortably until 2016.
• After which the need to adopt populist measures such as easier car ownership and lower public transport cost with better service might curtail growth of “public” transport companies. This might bring down growth rate to 3% which is normal economic growth.
Stock Classification
Indicators point to this as good stock valued for its strong
fundamentals
Valuation
�Methodology
�FCFF valuation
�P/E comparison
Valuation
Risk Free Rate 2.5%
Market Required Return 10.0%
Beta 0.54
Cost of Equity (CAPM) 8.6%
Risk Premium for Terminal Value
Return2.0%
Growth Initial 6%
Growth Terminal 3%
Proportion of debt 0.33
Proportion of equity 0.67
Cost of debt 5.2%
Tax rate 21.6%
WACC 8.45%
Valuation
Based on FCFF model $m:
Cashflow from operations 687.2
minus CAPEX 484.0
FCF 0 203.2
FCF 1 215.4
FCF 2 228.3
FCF 3 242.0
Terminal value 4573.9
Firm Value 4168.3
Valuation
Based on FCFF model $m:Firm Value 4168.33
minus borrowings 607.80
add cash 694.60
FCFF Valuation 4255.13
No of share outstanding 2102.00
Fair value per share 2.02
Today’s Price : 1.96
Valuation (P/E)
Company P/E
Comfort Delgro 16.38
Sats Ltd 17.12
SIA Engineering 19.97
SMRT 33.65
Source: www.markets.ft.com
Ave P/E group excluding comfort = 23.58
Implied Comfort price = 0.119 x 23.58 = 2.80
Trading Data
52 Weeks Trading Range $1.57 - $2.21
Avg Volume (3 mths) 10,389,300
Market Cap $4.13 B
Main Risks
�Government Regulation.
�Fluctuating oil prices.
�Forex Risk.
Main Risks
�Default Risk – Low
� Current ratio = 1.19x
� EBITDA Interest coverage = 13.13 x
� D/E ratio = 0.49
� Loans maturing = $100 mil in 2015
� Cash = $694.6 mil