ComfortDelgro: Positioning for the long term - BUY (DBS)

4Q/FY08 net profit were within expectations. But, a lower dividend payout at 52% versus past 4 years was a surprise. It seems like management is conserving cash for acquisitions, which should be beneficial over the long term, given its track record. Maintain Buy, TP: S$1.57.

The Group declared a final dividend of 2.4cents, equating to a 52% payout, which was below our expectations of 70% and the range in the last 4 years (75% - 85%). We think management is conserving cash for overseas acquisition opportunities, particularly in Australia and China.

The recent Budget measures will yield S$35m for the Group and will be passed on as rebates and the widely anticipated fare reductions later this year. We do not expect the fare reduction to have a significant impact on the Group’s bottomline.

Whilst the market may be disappointed by a lower dividend payout versus its historical average, we think this may be beneficial for the Group in the long-term if they are able to deliver on accretive acquisitions to reinforce its overseas growth. We maintain our Buy recommendation with a TP: S$1.57 based on 15x FY09F earnings.