Over 2,000 ComfortDelGro cabbies express interest in joining Grab
SINGAPORE — More than 2,000 ComfortDelGro cabbies could jump ship and join rival taxi operators partnering Grab or switch to become drivers of its private-hire car service, less than two weeks after Grab dangled heavily-discounted rentals to entice them, TODAY…
I've been doing DD on Comfort since it was in the $2.4+ range, but held back.
Today, I've finally initiated a position: 10,000 shares at $1.98
I'm expecting a rebound in the near term, and would still be cautious over the mid to long term.
The time to enter in a BIG way is when all the ppl who have been caught holding at much higher levels, as well as those who have caught the falling knives, stop saying they'll "average down".
That's when I know the market participants have stopped hoping.
In the meantime, the current rapid fall means that the fundamentals are too juicy for me to ignore.
Historical PE range of Comfort is within 14 - 25 in the last 5 years.
But IMO, it's too dangerous to take that at face value. Simply because the business dynamics have certainly changed in the past 5 years.
So we have to reconsider the fundamentals of the whole industry.
I've incorporated in my valuation, a 10% drop in EPS for FY17 (at half year mark it's a 3% gain from y-o-y, but in mrq, it's a slight drop, so a 10% margin is certainly conservative enough)
At my entry price of $1.98, that gives me a PE of 15, taking into account a 10% drop.
dividend yield of just over 5%
More importantly, CDG has 1 thing going for it that's under estimated: the business generates a ton of FCF consistently.
In the past 5 years, only 1 year has negative FCF.
I'll be happy with a respectable gain in the short term. Longer term wise, I'd only increase the position size if the prices drop a lot more, my initial entry price leaves a lot of room and ammunition for adding.
I previously held this counter and released all I had at a price of $2.65. After a barrage of good news, I decided to enter the foray once again.
Throughout this entire coverage, I am assuming a profit margin of only 9%, which is a tad lower than their Q12017 profit margin of about 9.8%. Therefore, all my calculations here will be UNDERSTATED if they were to improve their profit margins, which has been the case over the last few years.
What I am also assuming is that there are no further sales order received from customers, which is almost zero probability.
Ready to read on? LETS GO!
"The Company is pleased to announce that it has received as at 31 May 2017, sales orders worth S$182 million for delivery in FY2017. This represents an increase of S$30 million in sales orders received over the previous sales order received announcement made on 18 April 2017."
With a profit margin of 9%, $182m of revenue equates to $16.38m of profit, which averages out to $5.46m per quarter. Adding q1 earnings, total year earnings will be 20.5 million, which equates to an EPS of $0.32.
With such an EPS, the share price of $2.72 represents a PE ratio of ONLY 8.6x. Everyone knows that this is an INSANELY low PE ratio, and that the market has not fully priced in the growth that is to come.
Even if it goes to an undemanding PE ratio of 12x, the price would have already grown to $3.8. I personally do not think that the management would allow the stock to escalate to that price, and they would issue bonus shares to improve the liquidity of the shares.
What else do we want? It does not stop here! The company states - "Thirdly, with clear visibility of growth into the next few years, we intend to adopt a dividend policy to pay annual dividends, including interim dividends, of not less than 25% of profit after tax excluding non-recurring, one-off and exceptional items."
With a minimal profit estimation of AT LEAST $20million, 25% profit means $5m paid out, which equates to a dividend of at least 2.8% for an insane growth company.
To top it all of, institutional investors are buying in to AEM as well. "is pleased to announce that several long-only institutional funds have bought AEM shares and have become new shareholders. The institutional funds took up 2,737,800 shares at $2.70 a share from Orion Phoenix on 5 June 2017."
With this massive inflow of funds, I believe that AEM will attract many more institutional investors. I do not see Orion Phoenix reducing the percentage of their shares any further. With Institutional Investors buying at a price of $2.70, there is a major support there and I only see the price going up.
This is only the beginning of AEM!