ComfortDelgro Corporation - Has entered into a new taxi equity JV in Nanjing

CD’s wholly-owned subsidiary, ComfortDelgro China, has entered into a JV with
Nanjing Bulk Lifting and Transportation (NBLTG) to form an equity JV company
known as Nanjing ComfortDelgro Dajian Taxi Co, with CDG China holding 70%
and NBLTG holding 30%.
The JV Co will operate an initial fleet of 497 taxis with a registered capital of
RMB120m (S$24m) with CDG China contributing cash of RMB84m (S$16.8m)
and NBLTG contributing taxis, taxi licences and other operating assets into the
JV Co.
NBLTG is one of the three largest taxi companies in Nanjing, and is involved in
the transportation of bulky items, passenger transportation, port logistics
operation, and real estate development.
The transaction is not expected to have any material impact on NTA and
earnings of CD for FY07.
We view the transaction positively, as this enlarges CD’s coverage in China.
China revenue has been a key contributor to CD’s revenue expansion and we
expect this to continue based on organic and inorganic expansion. This will help
to boost CD’s earnings.
BUY CD. Our target price of S$2.91 comprises a) S$2.70 value based on
current land-transport ownership structure, which factors in a DCF valuation of
the Singapore bus, rail and advertising operations (using 2.5% terminal growth
rate and WACC of 7.2%) and PE valuation for the other businesses; and b)
S$0.21 based on the assumption of restructuring of the Singapore land transport
system to one-operator running all rail and bus services.