Cabcharge

Cabcharge (CAB) has a retained Outperform stock recommendation and a 12 month share price target of $12.95 from Australian stock analyst Macquarie Research Equities. The analysts are strong believers in the outlook for Cabcharge (CAB). In fact, on the company's numbers, CAB is trading at a multiple of 17x next year's earnings - the cheapest it has been in two years. FY07 EPS growth of 32%, 4% short of expectations: Cabcharge delivered a FY07 Net Profit After Tax (NPAT) of $51.8m, up 36% (Macquarie: $53.9) on an EBIT inclusive of associates (Westbus & UK) of $71.9m (Macquarie$71.7m). Core payment system delivers 16.2% turnover growth. The key drivers remain taxi fare inflation (4.6%), additional taxis on the road (1.2%), the GPRS system allowing more taxis to carry the Cabcharge payment terminal (estimated 5%, non-recurring growth), as well as the substitution effect of more customers preferring to pay by card instead of cash (estimated 3.5%). The analysts estimate that the underlying revenue growth is around 8.10% and the leverage within the model provides EBIT growth of 15.25%. Outlook for Cabcharge is positive. Although no specific guidance was issued, Cabcharge did note that the outlook was even more positive than in previous years, despite the unsettling period in world markets and the credit crunch.. The last three years has seen Cabcharge deliver 17.7% EPS growth in FY05, 36.8% EPS growth in FY06, and 32% EPS growth in FY07.The analysts havea forecast EPS growth of 25% for CAB. The analysts' 12-month price target of $12.95 is derived by applying an EV/EBIT multiple of 13.5x to Cabcharge’s (ex. Westbus and UK) FY09E EBIT of $91.3m and 16.5x to MRE’s $16.2m equity accounted NPAT contribution of the Westbus and UK investments. The Cabcharge investment thesis remains intact with superior and increasing returns on capital derived from a high growth, dominant payment business, and select investments in transport businesses.