Hi all, this post is a continuation from my earlier post on $ComfortDelGro(C52.SI).

Please let me know your comments, and enjoy your Sunday evening!

https://alpacainvestments.blogspot.sg/2017...

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ThumbTackInvestor

nice work.
Hope we can see more stuff like this from you.
Thanks for the effort

thrusthebust

once again.. 2.15 coming soon..

AlpacaInvestments

Hey guys, please do not take my fair value to be accurate and dyodd too. I know that some of us here are vested in CDG, in that case, I hope that I’m wrong, so you guys can make money!
For the CDG bears, even if my fair value is accurate, the market can remain irrational for extended periods of time, and we may have to wait a long time to see CDG hit those levels I estimated. That is the beauty of the market.
Personally, when CDG dipped below $2 last week, I considered pulling the trigger, because I have a rather high proportion of cash available. However, I decided to wait for the 3Q results.
Lastly, my parents have a rather sizable exposure to CDG, in the $2.10 range, so you could probably classify that as a deemed interest haha. Therefore, it isn't entirely positive for me if CDG declines sharply, but I’ll be ready to initiate a position if it reaches a reasonable price!
Cheers! :)

AlpacaInvestments

Reply to @Dividend_Warrior : haha, I'm not vested, but my parents are!

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SSJ4

@AlpacaInvestments thank you bro for supporting 168!

SSJ4

''In my previous article, I valued CDG's remaining business segments at $1.339, using a P/E ratio of 14. Therefore, based on my calculations, the fair value for CDG's shares should be between $1.68 and $1.81.''

AlpacaInvestments

Hi @bgting,
Thank you for your feedback!
Regarding the table, I should have been clearer with the labeling, it should be 'taxi operating income' and 'total net profit excluding investment income' instead. I have updated this and attached the table below, which hopefully clears up any misinterpretations!
As for the revenue projection, I used 1H 17's y-o-y fall compared to 1H 16 of 8.3% to estimate a total decline of 8.3% for FY17 from FY16. I understand your point on this, and if we estimated by a q-o-q decline instead, our projected revenue for 2H 17 would be around $580 million instead of $611 million. This would lead to a lower fair value. Alternatively, we could also use a more bearish scenario from the second table to give us a larger margin of safety.

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2V_

There are more than 1,500 taxis parking idle, there are cost and losses to this idle taxis, how do you quantify this?

AlpacaInvestments

Reply to @2V_ : Hi, I believe we could use a more bearish scenario from the second table to give us a larger margin of safety, by estimating higher compression of profit margins and a larger decline in revenue!

bgting

Good work! Great to see refinements of analysis.

I'm not really that familiar with this taxi business and Comfort, so asking with some ignorance, hope you don't mind. :-)

The table states the item as "Net Profit excluding investment income", which is higher than operating income. I thought that should mean the investment income was negative?

If I don't comprehend wrongly, you have sort of projected the revenue for first half into the second. Is the revenue from taxi business mainly from rental of the vehicles? If so, it's in the news that the rental has been falling along with taxi drivers jumping ship. Is this taken into account?

SSJ4

omg i see a 1.68!!!

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Recommended & Related Posts

Hi all, while researching on $SBS Transit(S61.SI), one aspect that I felt was difficult to evaluate was the impact of the Bus Contracting Model on SBS' earnings. Could anyone with a deeper insight provide some views on this?

I found two articles that seemed to portray conflicting outcomes of the BCM.

The first article stated that the BCM lifted SBS' profit:
http://www.straitstimes.com/business/compa...

I understand that under the BCM, the Government takes control of the bus assets. This lowers the depreciation expense for SBS, which increases profit margins, leading to higher earnings.

The second article seemed to suggest that competitive pressures would lower profit margins, even leading to losses: http://www.straitstimes.com/singapore/tran...

Quoting from the article, “Transport researcher Lee Der-Horng from the National University of Singapore reckoned SBST's bid was "below cost" as it is able to "cross subsidise" because of its size.” And “If the message is that a new operator should take a loss to have a foot in the Singapore market, it may not look attractive for foreign companies."

This suggests that the competitive bids forced SBS to bid below cost for the Seletar Bus Package, resulting in an operating loss. This is puzzling, as why would SBS take on a loss-making contract, just to achieve scale? If this is true, won’t the BCM be negative for the operators as competition results in extremely low margins? Furthermore, under the BCM, the revenue earned goes to the Government, so there’s little revenue upside for SBS.

Which of the outcomes are more possible? Thanks in advance!
$ComfortDelGro(C52.SI)

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Hi all, here's my analysis of $ComfortDelGro(C52.SI). Please share your comments!

Thanks and have a great weekend!

https://alpacainvestments.blogspot.sg/2017...

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$ComfortDelGro(C52.SI)

Don't understand how the Uber deal could send CDG shares up by 10% in a day. In the first place, Uber and Grab would not have killed off CDG, the new entrants to the market just lowers the huge profit margins that CDG enjoyed in the past. The deal would benefit Uber more than CDG, as Uber is still competing for market share. For CDG, the outcome would still be the same - lower profit margins from the taxi segment.

A simple calculation would suffice: In the past, CDG rented taxis out for around $110/day. Uber/Grab does it for $50/day. Even after factoring in the 20% that U/G takes from drivers, the total would still be around $70-80, far less than what CDG used to charge. CDG has been making huge profits in the past, which has ended because of the new entrants.

Eventually there would be equilibrium in the market - U/G can't continue to make losses forever. Just that ultimately, the profit margins for the taxi segment would be razor thin, and we definitely should not value CDG as a 'monopoly' anymore.

http://www.straitstimes.com/singapore/tran...

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http://www.straitstimes.com/singapore/grab...

"We're five years old but I feel as if we've evolved and changed as a company at least five times, if not 10 times."

All about innovation, change and adaptability. Compare this to the management of $ComfortDelGro(C52)

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$ComfortDelGro(C52)

Huge selloff today, even though net profit was up 12.4%. Net profit rose mainly due to a special dividend from CabCharge Australia. Without this one-off dividend income, net profit would have been flat.

I think it would be more appropriate for us to consider operating income, which fell by 8.1% this quarter. Looking at the operating profit from the past few quarters, they were in the region of $110-120 million, so an operating profit of $100 million this quarter may be slightly worrying.

While a lot of attention has been on the rise of Uber/Grab as competitors, this should be taken in context, given that the taxi segment makes up slightly more than 30% of CDG's operating profits. The public transport segment is the largest contributor to operating profits. Nonetheless, I feel that the management's response to competition from Uber/Grab has been rather slow and ineffective, which is a cause for concern. Most millennials that I know almost exclusively use Uber/Grab. Years of dominating the market share probably resulted in complacency. And from the observations by some InvestingNote users who attended the AGM last month, the management's ability to take on its competitors is questionable.

With the management projecting revenues for most of its business segments to fall and foreign currency translation risks, I believe CDG is fairly valued now, with little or no margin of safety. CDG would still be on my watchlist as a dividend play.

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