OCBC starts hold on ComfortDelGro

Stock Name: ComfortDelGro
Company Name: COMFORTDELGRO CORPORATION LTD

Research House: OCBC

Price Call: HOLD

Target Price: 1.53

OCBC Investment Research initiated a hold rating and a target price of $1.53 on Singapore transport operator ComfortDelGro Corp, whose main operating segments are buses and taxis.

Its shares eased 0.7% to $1.47, faring slightly better than the benchmark Straits Times Index, which lost 1.2%. The stock has gained nearly 4% so far this year.

For the 2003-2011 fiscal years, ComfortDelGro's revenue grew at a "decent" compound annual growth rate of 8%, and its recent first-quarter results showed broad-based increases across most operating segments, OCBC said.

OCBC projected ComfortDelGro's revenue to continue its upward trajectory, although at a slower pace, on the back of rising ridership levels on its bus and rail operations, greater fleet utilisation and more cashless transactions in its Singapore taxi business.

But OCBC said the company's operating margins may face some pressure from regulations and public sentiment that could make it harder to raise fares, and higher operating expenses and expansion costs related to the upcoming Downtown Line in Singapore.