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