Comfortdelgro share price extends losses; analysts downgrade stock

ComfortDelGro share price slides further to 2.5-year low on coronavirus fears

ComfortDelGro continues to struggle on the stock market, with its share price falling another 2.56% since our last update.

Trading at S$1.94 a share as of 3pm on 03 March, this is the stock’s lowest point since it hit S$1.91 in December 2017.

This latest decline comes after a slew of negative updates regarding the coronavirus outbreak, whose case and death toll currently stand at over 91,000 and 3,100 globally.

To put matters into perspective, ComfortDelGro was not the only Singapore stock to suffer a new round of losses amid the worsening contagion outbreak.

Singapore stock benchmark Straits Times Index (STI), which tracks and tallies the performance of individual listings on the Singapore Exchange – including ComfortDelGro, also suffered its steepest drop since July 2019, falling 3.82% to a 14-month low of 2,992.071.

Last week, a majority of Singapore blue-chip stocks – among them the likes of the country’s top three banks DBS, OCBC and UOB, as well as Singapore Airlines and agriculture producer Wilmar International – also witnessed a sharp drop in share prices.

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Analysts downgrade ratings on ComfortDelGro shares

In line with the stock’s recent underperformance, DBS’ research team has removed the Singapore transport operator from its top blue-chip equity picks list for the month of March.

Analyst Andy Sim had downgraded his stock rating to ‘hold’ on a lower share price prediction of S$2.26 (from S$2.45 previously), after the company revealed a soft outlook for 2020 in relation to COVID-19.

The group stated in its 2019 year-end financial report that its taxi, public transport and transport related businesses have been ‘witnessing lower ridership and volumes’, as the company faces ‘significant operational challenges’ due to COVID-19.

On the back of this guidance, Sim had trimmed his annual earnings estimates for ComfortDelGro’s 2020 and 2021 financial years by 6.2% and 4.8% respectively.

He added that dividends per share (DPS) ‘could trend lower in FY20F before reverting up in FY21F’. For now, his team projects this financial year’s DPS to move down to S$0.96 per share, versus S$0.107 per share previously.

Still, DBS had noted that as of 17 February, the stock had returned 1.8% since inclusion on 6 February, and still managed to outperform the STI by 1.2%.

Weaker public transport earnings going back to 2019

Notwithstanding the impact of the coronavirus outbreak, group earnings were already on the decline.

The group, which has land transport operations in Singapore, the UK, Australia, China, Vietnam, and Malaysia, saw its 2019 net profit attributable to shareholders drop by 12.6% or S$38.2 million to S$265.1 million.

A deeper probe into the results showed that much of the weaker earnings can be traced back to the public transport segment’s weaker-than-expected performance.

Public transport recorded a revenue of S$744.3 million in the fourth quarter of 2019, flat against Q4 2018. Operating profit for the segment was down year-on-year due to a licence charge for Singapore railway network, Downtown Line.

Furthermore, the line grew its average daily ridership by a ‘tepid 6% year-on-year to 477,000 in 2019’, according to UOB Kay Hian researcher Lucas Teng.

He added that business is ‘still tough for Downtown Line’, with higher maintenance costs associated with the ongoing North East Line and Light Rail Transit fleet’s ‘mid-life refurbishment’ and staff salaries still to come.

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