CITYFLEET Networks, a subsidiary of transport operator ComfortDelGro : C52 +0.86%, has bought a private hire company based in the United Kingdom called Vedamain for £ 7.25 million (S$11.8 million).

 

The deal, which is for the entire issued shared capital of Vedamain, was paid for entirely in cash to its sellers Nigel Hugh David Thomas and Caroline Jane Thomas and funded through internal resources, said ComfortDelGro in a bourse filing on Friday (Mar 17).

 

Vedamain operates a fleet of about 500 private hire cars in Chester, England, under the KingKabs brand.

 

The purchase price was arrived at on a &ldquo willing buyer willing seller&rdquo basis following arm&rsquo s length negotiations, after taking into account the projected performance of Vedamain and historical analysis among other considerations, said the filing.

 

ComfortDelGro added that this acquisition has no material impact on its net tangible assets or earnings per share for the financial year ending Dec 31, 2023.

 

RHB Group Research is reiterating its &ldquo buy&rdquo recommendation on public and private transport operator ComfortDelGro (CDG) C52 -1.69% with an unchanged target price of $1.40, on the back of compelling valuations and strong yields.

 

Analyst Shekhar Jaiswal expects the stock to deliver 11% profit growth in FY2023 ending December, aided by the recoveries in Singapore rail ridership, Australia bus charters, UK coach services, and Singapore and China taxi services.

 

SBS Transit S61 0.00% , the group&rsquo s Singapore public transport subsidiary has reported continuing improvements in rail ridership. The average daily ridership in February was 51% and 38% higher than the ones in the same month for 2022 and 2021 respectively. But on a ytd basis, average daily ridership was 7% lower than 2019 levels.

 

&ldquo We believe this improvement, which should sustain itself during the coming months, will help support the profits from the public transport business. While the taxi fleet in Singapore is on the decline, CDG has gradually increased its market leadership position within this segment,&rdquo says Jaiswal, adding that the strong demand for taxi services should continue to support driver earnings and enable CDG to gradually taper off rental rebates.

 

As the public transport ridership in Singapore had seen a strong recovery in 2022, with more people returned to work and leisure activities after two years of Covid-19-related restrictions. &ldquo We expect the public transport services, especially rail services, to witness a strong increase in ridership on higher tourist arrivals in 2H2023,&rdquo says the analyst.

 

He also expects the group&rsquo s Singapore and China taxi businesses to benefit from the East Asian nation&rsquo s economic reopening.

 

&ldquo Despite expectations of higher operating costs, the uncertainty over the timing of indexation formulas, and lower bus service fees, we believe CDG can deliver about 10% profit growth during FY2022 to FY2025,&rdquo says Jaiswal, who also expects a higher dividend payout in FY2023. He estimates a 65% payout ratio for FY2023 to FY2025, which implies yields of 5-6%.

 

Overall, Jaiswal sees the stock as attractive as its share price has outperformed the rapidly falling Straits Times Index (STI) in the last month, as investors value its ability to deliver growth despite macroeconomic uncertainties, as well as its ability to sustain higher dividend payouts. At this point, the stock is trading at an attractive FY2023 P/E of 13 times, compared to its historical mean of 16 times.

 

CGS-CIMB on Thursday (Mar 16) reiterated its &ldquo overweight&rdquo view on Singapore&rsquo s property sector, eyeing opportunities amid trading discounts in counters such as CapitaLand Investment, City Developments Limited (CDL) and UOL Group.

 

The brokerage still considers the developers&rsquo valuations &ldquo inexpensive&rdquo , given that they were trading at a 47 per cent discount to revalued net asset value &ndash close to one standard deviation below the long-term mean discount.

 

This comes as the analysts noted a rebound in home sales in February, where 470 units were transacted.

 

Excluding executive condominiums, private home sales stood at 432 units, the highest in terms of volume since property cooling measures were announced last September.

 

However, CGS-CIMB also cautioned that price growth among private homes is likely to moderate in 2023, based on historical data in January and February this year. The research house expects prices to rise by a moderated zero to 3 per cent this year.

 

Despite this, investors can still seek out opportunities in developers with visible residential pipelines and strong balance sheets that would enable them to tap any opportunity during this slower cycle, said CGS-CIMB.

 

Top picks listed by the brokerage include CapitaLand Investment, with a target price of S$4.50 CDL, with a target price of S$8.97 and UOL Group, with a target of S$8. All three were given an &ldquo add&rdquo recommendation.

 

CDL, the analysts noted, has a potential launch pipeline of about 2,000 units. Share price catalyst for the group &ndash which currently trades at a 57 per cent discount &ndash could come from the recovery of the global hospitality industry.

 

However, demand for housing could be dampened by faster-than-expected interest rate hikes, slower economic outlook and property cooling measures, said CGS-CIMB.