ComfortDelGro - ComfortDelGro up on BNP Paribas' upgrade

Stock Name: ComfortDelGro
Company Name: COMFORTDELGRO CORPORATION LTD
Research House: BNP Paribas

Shares of Singapore transport operator ComfortDelGro (CMDG.SI) rose as much as 3.1% on Monday after BNP Paribas upgraded its rating to “buy” from “hold” and raised its target price to $1.98 from $1.63.



At 0403 GMT, Comfort DelGro shares were up 2.5% at $1.63 on a volume of 7.2 million shares.

BNP Paribas said it expects higher margins from ComfortDelGro’s overseas businesses, such as its Australia bus operations as well as China taxi and bus stations, adding that its reduction of fuel subsidies at end-December is likely to buffer its margins.

“For Singapore side, ComfortDelGro will have to take the ridership risks, so if the ridership does not grow their margins will be not as high accordingly,” said Brenda Lee, an analyst at BNP Paribas who covers the firm.

“But overseas it’s based on fixed contracts. Whether there is sufficient ridership or not they can still continue to enjoy similar margins, and if they improve their service, the overseas governments can actually give them some rebates,” she added.

BNP Paribas said that based on its FY2011 estimates, ComfortDelGro trades at 13.6 times price-earnings ratio, a 25% discount to its closest peer SMRT Corporation.