ComfortDelGro to milk $2-2.5m profit from Aussie acquisition

And this is likely to grow bigger.

According to Nomura, following the acquisition of selected FirstGroup’s assets in London, ComfortDelgro has swiftly launched another acquisition, this time in Melbourne, Australia.

The group will acquire 100% of the issued shares of Driver Group Pty Ltd for A$22mn (S$27mn). Assets to be acquired include 5 metropolitan bus routes in the Eastern suburbs of Melbourne and a fleet of 42 vehicles.

Here's more from Nomura:

The bus routes contract(s) run till 2018, according to management. The acquisition will be made through CDC Victoria Pty Ltd, a subsidiary of ComfortDelgro Cabcharge (CD’s 51%-owned JV).

The deal is expected to complete in July 2013. We expect the acquisition to be funded primarily by cash with a small amount of debt, if any.

Assuming that the historical EBITDA of A$3.8mn is achievable, we expect a net profit of ~S$2.0–2.5mn p.a. After adjusting for the fact that ComfortDelgro only owns 51% of the JV, the accretion will be minimal at S$1–1.3mn or ~0.5% of FY14 earnings.

The accretion could be more if the group is able to grow route revenues (e.g., higher trip frequencies, distance travelled, etc) or through cost synergies (e.g., economies of scale from larger fleet, sharing of depot).

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