On June 2, CDG’s wholly-owned subsidiary, ComfortDelGro Corporation Australia (CDC) had been awarded a six-year contract to solely operate public bus services in the Northern Territory. The contract areas cover a significant part of Northern Territory’s network which includes Darwin and Palmerston, with 170 buses operating across 180 bus routes.
“Expected to commence on July 1, the contract is estimated to be worth around A$220 million ($211.5 million). Based on our estimates, this new bus contract would boost our 2022-24 patmi estimates by 2-3%,” Tan writes.
As such, Tan has upped his patmi forecast for the FY2022 to FY2024 by 2% to 3% after accounting for new earnings contribution from the Northern Territory contract.
Further to his report dated June 27, Tan is positive on the SGX-listed company. In addition to the Australian contract win, Tan also cited the improving rail ridership due to Singapore’s relaxation of Covid-19 measures, as a positive factor in CDG’s outlook.
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“From April 26, Singapore’s authorities announced the easing of most of its social distancing measures. Some of the relaxed measures include the removal of group size limits, safe distancing no longer being mandatory and 100% of workers are now allowed to return to their respective workplaces,” says Tan.
“Furthermore, Singapore’s international borders have fully reopened, welcoming back tourists. Backed by a population that is almost fully vaccinated, these favourable tailwinds would help underpin CDG’s public transport and taxi earnings as mobility improves,” he adds.
SBS Transit, CDG’s 75%-owned subsidiary and a public transport operator in Singapore, experienced a strong recovery in rail ridership for May, seeing 56.8% year-on-year (y-o-y) and 4.6% month-on-month (m-o-m) increases. This forms 81% of pre-pandemic levels for May 2019.
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“We reckon that this is due to more office workers returning to office spaces and the removal of dine-in group size limits. According to [the] Land Transport Authority (LTA), passenger demand for point to point trips has gradually improved, albeit seeing slight dips due to Covid-19 outbreaks. Overall, we expect rail and taxi ridership to reach near pre-pandemic levels by 1QFY2023,” explain the analysts.
As at 3.21pm, shares in ComfortDelGro are trading 2 cents higher or 1.45% up at $1.40.
