Brokers' take

Compiled by Lee Meixian




OCBC Investment Research, March 21

In the few months up to Jan 18, we saw encouraging taxi operational indicators, which we view as positive for ComfortDelGro.

First, we noted three consecutive months and five consecutive months of year-on-year growth in the industry average engaged mileage recorded for one-shift taxis and two-shift taxis, respectively.

Second, we also noted that month-on-month growth in rental cars was more subdued, while the rate of decline in taxi fleet size slowed down for the more significant taxi operators.

In our view, these indicators point to a more stabilised environment for the taxis and private-hire car services.

Separately, during the Singapore Budget 2018 debate, the Ministry of Transport highlighted two points, which we believe are positive for ComfortDelGro:

1) Fares are likely to rise, moving forward, and

2) Regulations on private-hire car services are likely to increase.

For now, one catalyst to look out for would be the pending regulatory approval of ComfortDelGro's alliance with Uber.



MARCH 20 CLOSE: $13.42

Maybank Kim Eng, March 20

We believe OCBC's earnings momentum is likely to be sustained in an upcycle.

We raised our FY2018 to FY2020 forecast net profit by 4 per cent to12 per cent, due to higher assumptions for loan growth and non-interest income from stronger wealth management earnings and life insurance contribution from Great Eastern.

With the revisions to our earnings per share forecasts, our assumed sustainable return on equity (ROE) is now 14 per cent, up from 13.1 per cent previously, with a cost of equity of 10.5 per cent and growth rate of 3.5 per cent (both unchanged).

Our target price is raised 10 per cent to $14.83, based on 1.5 times FY2018 price-to-book-value.

We also believe that OCBC's valuation multiple deserves to rise in view of its ability to expand ROEs from non-interest income growth.

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