Free Shares From ComfortDelGro

It had been some time since I last wrote anything about CDG.

Recalling back, the last time I officially wrote something about CDG is back in December 2017 regarding the alliance with Uber.

Source: ComfortDelGro

In the recent days, CDG had a good run. Which is probably also one reason why I decided to write a little about it today.

Source: Google - CDG's Share Price

The title of this blog post may sound really misleading but I'm sure that some readers would probably guess it right from reading the title.

I'm not lying!




Feeling bored from work some days ago, I've also decided to a do a simple TA on ComfortDelGro to understand a little bit more about the recent price actions.

To cut things short, I've decided to reduce my exposure with CDG and sold 600 shares of ComfortDelGro at 2.38 in the market today.

To simplify it, with an average price at $2.07 per share, I'm looking at a profit of 37.5 cents per share (including dividends), which will translate to $262.50

Along with the dividends received, I've sold 600 units in the market today, taking back the first dollars I've injected into CDG. Thus, making the 100 units in balance free-of-charge.

For the slightly mathematical person, based on the closed positions, I'm looking at a gain of +15.5% from this divestment or an annualized return of 23.4%.



Who doesn't like free thing!?

Personally, I'm a cheapskate and enjoy free things.

This time round, I'm enjoying some free shares from ComfortDelGro.

I'm sure things will look much better if I have a higher vested interest/capital to deploy for CDG. Not forgetting if I have a lower average price or that I've bought more when it's hovering around 1.90.

In this episode, I've also learned that market timing and account size is very important too!




A very brief and quick look into CDG's 1Q18 Financial Results
CDG has also released it's 1Q result last Friday which have posted a slightly better outlook as compared to the latest result.

Source: CDG 1Q18 Financial Presentation - Slide 3

The financial summary in comparison to 1Q2017 showed that despite increasing revenue, the profit has been decreasing. However, with a decrease in EPS for this quarter, a simple calculation of multiplying it by 4 will show me that CDG is still able to pay its dividend of 10.4 cents (assuming dividends remain constant) within it's FCF for the coming year should they not increase their CAPEX unnecessarily.

With the improving sentiments in the local taxi business and foreign acquisitions, this might be an avenue where CDG will be able to bring their EPS up and back, which might bring smiles onto the faces of investors.

With this in mind, assuming that all 4 quarters EPS is to remain at 3.06 cents, this will bring me to earnings of 12.24 cents. Taking the price at 2.30 into consideration, we're looking at a P/E ratio of 18.79 which is no longer cheap in my opinion.

It's not exactly accurate to measure the earnings in this manner as they're subjected to its upcoming business performance. However, only with greater earnings to come, this will make CDG at this price today a cheap business to own.




Comparing to its P/E ratio today to months ago and days during a crisis, CDG is no longer a cheap company to own and I'm definitely not looking to buy into CDG at this price.

Source: CDG 1Q18 Financial Presentation - Slide 7

Despite the increase in gearing, CDG's net cash position has also gone up decently by $23.7 million or 8.6%.

Source: CDG 1Q18 Financial Presentation - Slide 21

The business outlook posted by CDG in this financial presentation is rather conservative too. A good thing to note is the upgrading of outlook in its Taxi Business.



I'm thankful and felt that I've been lucky as an investor of CDG to receive some freebies from them. But as a novice, I must remember to not be greedy as greed is the root of all evil.

Having to divest partially from CDG, I honestly felt that there is still room for CDG to improve on as a company despite facing headwinds in the local taxi businesses, although Uber's departure would probably subdue a little effect in it.

CDG have been looking for opportunities to invest into the foreign market such as the recent acquisition of Dial-A-Cab in UK and Tullermarine Bus Line in Melbourne to diversify their earnings beyond the reliance on taxi business in Singapore. CDG is also trying to hook up with Go-Jek, an Indonesian ride-hailing company as CDG's ride-hailing partner in Singapore.

In the latest news, CDG has also added 200 new Hyundai Ioniqs to its fleet to accommodate more returning drivers from the PHV business. This addition of fleet has not happened since the last 1.5 years. 



All these events on top, if lucrative will also provide CDG with a greater earning and revenue to come.

With these paying off, I'm sure CDG will be recovering from the damages sustained in the last technology disruption. Not saying that the technology disruption has ended, but for now, the effect is lesser as compared to the days in a triple threat match. Nonetheless, Grab today still pose itself as a competitor against ComfortDelGro and I will not be surprised to see more news and attempts from Grab to battle CDG once again.

As such, I've decided to be a contented investor of CDG and keep this 100 free shares from them.
I'm a little sad today to say goodbye to its future outlook and the number of free burgers that I'll be possibly receiving from them annually.

But on the other hand, I'm glad that this 100 free shares will translate to 2 free Fillet-O-Fish meal each year for me.



So it this considered as a compounding free gift!?

CDG's 1Q18 Financial Presentation can be found here.
CDG's 1Q18 Financial Statement can be found here.

Read:
Accumulating ComfortDelGro
Portfolio Update - ComfortDelGro & Wilmar

You may also subscribe to receive my latest email updates here.

CDG ties up with Uber!

8 December 2017 - ComfortDelGro Corporation Limited and Uber Technologies, Inc. today announced that they have entered into a strategic agreement to joint venture that brings together one of the world's largest land transportation companies with the world's leading ridesharing service to leverage their operational and technological excellence.

Under the agreement, CDG will acquire a 51% stake in Uber's wholly-owned car rental subsidiary, Lion City Holdings Pte Ltd which has a fleet about 14,000 vehicles for a cash consideration estimated at S$295 million (based on the NAV of S$642 million based on the value of 12,450 vehicles). LCR will be able to benefit from CDG's fleet management and operation while CDG taxi's driver will be able to receive ride requests on the Uber driver application, increasing their potential earnings.

This deal is CDG's single largest deal-to-date.

Currently, they are finalizing on the additional partnership opportunities and will make further announcements in the upcoming months.

CDG's price had been badly beaten down in the recent week, dropping to their new 52W low and closing at 1.91 today. Just moments ago, they've finally released the news on the strategic alliance - announcing that CDG and Uber has entered into a strategic agreement.

I've been in the queue today, queuing at 1.90, hoping to nibble a little bit more on CDG's share. Unfortunately, my queue is not filled.

I'm having some mixed feelings with regards to the announcement made. With the partnership confirmed, this will allow CDG's driver to tap onto Uber's network for more bookings. While this event does not directly creates more revenue for ComfortDelGro, it helps by protecting the existing taxi drivers' interest as well as preventing more drivers from leaving which will result in further decrease in revenue for their taxi business.

I'm a little surprised by the decision that CDG has acquired a big fraction of Uber's business in Singapore.

On paper, it look like a good deal having to acquire 51% stake of 12,450 relatively new vehicle. A simple calculation will bring me to the sum of 46k/car - based on (295m/51%/12450 vehicles).

Looking at the other side - the acquisition of LCR. LCR's fleet of vehicle is relatively new and I'm pretty interested to know on how many cars are exactly rented out. Without a number it's a little difficult to determine if this is a lucrative acquisition. Only when more numbers are revealed, the directions will be clearer.

Acquiring a 51% stake is pretty big here and a question will come if they will be able to recover their investment. Also, to remember that the rental price in LCR is cheaper and provides a lower margin. A big question also come by when CDG is having difficulty in managing their own fleet of vehicles and they're currently acquiring more vehicles.

Back to basics, as a consumer point-of-view, I believe most people that uses private hirer like Grab/Uber is using them because of the cheap prices and the ease of getting one. Having a price war is inevitable for companies like Grab/Uber who wants to steal a pie of CDG's plate. Hence, coming to the real issue here, it's the battle between prices. When lesser people is taking CDG's taxi, the drivers are earning lesser, and when the option of earning more comes (Uber/Grab), they will be jumping to another boat, which is why CDG is facing this problem now. However, if they were to reduce the rental fees, this will impact on their earnings negatively.
 
Before any much comments on how lucrative or not this acquisition is, I believe that as a shareholder, it is a good that the management is taking an approach to deal with a problem. I'll be looking to more updates from CDG to get a clearer picture of the situation.

Resources:
CDG's announcement can be found here.
CDG's Media release on strategic alliance can be found here.
Business Times news on CDG's alliance can be found here.

Accumulating ComfortDelGro

CDG has declined sharply last Friday to a new low of 2.09, dropping further when the market open on Monday and this continues to the price of 1.965 today.

LTA has announced on last Friday that SMRT has clinches the operating contract for Thomson-East Coast Line (TEL). The bid SMRT submitted was however 30% below it's rival SBS Transit, a subsidiary of ComfortDelGro.

Map of Thomson-East Coast Line (TEL)

The response is very negative from the market for this, shredding 11% of CDG since the last closing price on last Thursday

I've taken this opportunity days ago to cash in and accumulate 500 more shares of CDG at 1.99, which is 10% down from my previous average price at 2.22. CDG has became my greatest holdings so far. After averaging down, my new average price for CDG stands at 2.07/share. The last time CDG is trading at 1.96 (the price today) is back in March 2014, a 3.5 year low. Market capitalization from the drop has resulted in a decline of $475.81m.

There has been a big controversial in CDG recently, with different individuals voicing out different concerns about CDG's drop such as:

Falling fleet and 2000 Comfort's driver switching over to Grab for the heavily discounted rental.
A rental of $120/day x 2000 x 365 = $87.6m fall in revenue for the next year. 
This may continue to worsen should more driver of CDG switches over to Grab/other taxi provider.

Grab is currently very aggressive in the war with Comfort, I believe that the taxi fleet would continue to fall.

Towards which approach would CDG take to overcome this problem - selling their taxi business/scrapping their unused cars/price-war or offering incentives to retain their drivers. This shall be left to the highly-paid executives to make their decisions.

SMRT winning the tender to TEL.
This represents a "loss in possible revenue" to CDG's subsidiary, SBS Transit which will affect their earnings in the years to come when TEL opens.

On a positive note,

DTL3 will be opening in months time, and I believe that this will be able to slightly mitigate their pain in their revenue loss.

Healthy Balance Sheet - A good question will also be towards how Comfort is able to deploy their cash into generating more revenue for the group. With this destructive technologies, companies like SPH is also facing problem but has since diversified into other sectors such as properties. Will Comfort do the same thing? Again, This shall be left to the highly-paid executives to make their decisions.


With these in mind, the revenue losing businesses will translates to a falling EPS the next year. With the fallen share price, the price today at 1.96, it's priced at 13.25x their earning.

EPS now at 14.83c, assuming a 10% off it's revenue across all businesses in a terrible scenario, 13.347c of EPS will translates to 14.68x their earnings. To buy at the same 13.25x their earnings, 1.76 looks to be another price to enter.

Fortunately, my sizing are all extremely small. Should I catch a falling knife, it will be a good lesson for me.

There's still another blow to CDG should strategic alliance with uber fall through. I'll be reserving some bullets to accumulate more on the next blow, should it takes place and I will be looking towards to accumulating more shares of ComfortDelGro when opportunity presents :)

Fear, fear and more fear?
Read: A lookback into 1987 Black Monday


After the great correction of October 1987, the end of the world and the end of the banking system were widely predicted.
Peter Lynch


News on SMRT winning tender to operate TEL can be found here from CNA and here from Straits Time. TODAY report on ComfortDelGro's Taxi fleet here.

CDG's 2Q17 Report can be found here. 

A duet between ComfortDelGro & Uber?

ComfortDelGro in talks with Uber over possible alliance?

 

CDG has announced earlier today that it has signed a letter with Uber Technologies for an "exclusive discussions" on a possible "strategic alliance"

Despite 'taxi booking' has been made available through Uber/Grab's platform some time ago, it is important to also note that most rider uses Uber/Grab's private-hire rather than CDG's taxi as it is a cheaper alternative. The promotion given to rider could easily allow rider to travel between short distances for free or maybe as cheap as $1. 

As mention previously in the post regarding CDG's FY2017 Q2 report, taxis has been a very significant contributor to ComfortDelGro's business and revenue for taxi business has dropped by 10.7%.

With the possible collaboration between CDG and Uber, CDG is able to leverage Uber's platform by making Comfort's taxi available through the Uber app. This measure taken by CDG to collaborate with Uber will be able to ensure more bookings for comfort taxi drivers. This move taken by CDG to partner with the disruptor will in time brings in greater revenue for CDG's declining taxi business.

However, it will not be effective if the prices of trips were to remain high for rider that uses Uber for a cheaper alternative to cab.

There is no confirmation that the alliance will materialized and final structure remains unclear. 

Information can be found here.
ST report about possible alliance can be found here.

Portfolio Update - ComfortDelGro & Wilmar

Extremely grateful to wise seniors for providing me with advises and insights along the way, as well as to Miss Niao for the feature! Appreciate it very much.

Quick update - Recently, over the past week. I've utilized a portion of my war chest to initiate a position in Wilmar & ComfortDelGro.

ComfortDelGro
I've bought 200 shares of ComfortDelGro on their first day of XD, 17/08/17 at $2.17. Prior to XD they're trading at 2.24 and they've fallen below the price they've giving out their dividends.
CDG has been on a bear mode for months and have been fighting the war with Grab & Uber.

ComfortDelGro operates through 7 segments - Taxi Business, Public Transport Services, Bus stations, Automotive Engineering Services, Inspection & Testing Services, Car Rental & Leasing and Driving Centers.

Recently, CDG has released their FY2017 Q2 results, by which they've reported a decline in revenue which is caused by the decrease in revenue and more than half is contributed by the unfavorable currency translation and the remaining from 5 of their operating segments.

Taxis has been a very significant contributor to ComfortDelGro's business and revenue for taxi business has dropped by 10.7%. The damage is however slightly mitigated by the Public Transport Services and Driving Center business.

At $2.17, I feel that they're decently priced at about 15x their earnings. I'm also impressed by their ability in maintaining themselves in this demanding environment, fending themselves from the disruptive technologies. Knowing that, as well as being a regular customer of CDG in their public transport segment, I'm happy to initiate a position with Comfort. I'll be looking forward to their opening of DTL3 on 21 Oct later this year. In an event whereby their share price were to continue dipping, I will be more than happy to accumulate more of CDG's share.

After the great correction of October 1987, the end of the world and the end of the banking system were widely predicted.
Peter Lynch 

CDG's Q2 financial can be found here.

Wilmar
After queuing for several days, on 18/08/17, I've finally gotten 300 shares of Wilmar at $3.10. Similarly, Wilmar has released their 2Q2017 report recently.

Wilmar's business activities includes oil palm cultivation, oilseed crushing, edible oils refining, sugar milling and refining, specialty fats, oleochemical, biodiesel and fertiliser manufacturing, consumer pack edible oils processing and merchandising, soy protein manufacturing, rice and flour milling, and grain merchandising.

That's a very extensive range of services that they're providing.

In the report, they've reported a net profit of US37.3 million, improvements driven by recovery of Oilseeds division. The earnings is however affected by the losses incurred by the sugar division. Healthy balance sheet can be seen with total assets at US 37.33 bilion.

NAV of Wilmar at US 238.2 cents (1 USD = 1.3662 SGD), Wilmar's NAV is standing at S$3.254.
As such, I'm paying about 5% discount to the NAV at my entry price of $3.10. This provides me with a small margin of safety.

Wilmar has been under my watch-list for awhile and noticing them falling sharply below their 50D and 200D MA sharply after their release of results, I believe that there is too much pessimism factored in. It's also good to note that there is some support below the 3.10 level.

I believe that Wilmar will be performing well in the future and by any chance that it continues to fall, or should that support be broken, I will be happy to accumulate more shares of Wilmar at a lower price.
It's also good to note that the CEO/Chairman is very optimistic about their growth prospect.

 Mr. Kuok Khoon Hong, Chairman and CEO, said,

“We expect Tropical Oils to perform better in 2H2017 on the back of improvements in production yields and better margins from downstream operations. Oilseeds crush margins are expected to remain positive for the rest of the year and Consumer Products will improve as it enters its seasonal peak period. However, Sugar will continue to

be affected by the volatility in sugar prices. 

“While the Group may face short term challenges, we remain very optimistic about the tremendous growth prospects of our various businesses and will continue with our expansion plans, especially in China, India and Indonesia.”

Wilmar's Financial Statement can be found here, and news release here.