10 Things Every Singapore Investor Should Know About ComfortDelGro
March 13, 2023
Singapore’s largest taxi operator, ComfortDelGro Corporation Limited (SGX: C52) is one of the most well-known and iconic blue chip stocks listed on the Singapore stock market.
However, the company has since fallen from its S$2.80 per share level during the pre-COVID era and is currently languishing at around the S$1.20 level.
The COVID-19 pandemic has severely affected its business due to the movement restrictions that were imposed.
To add pain to the land transport operator, ComfortDelGro was removed from the Straits Times Index (STI) by FTSE Russell following its quarterly review in September last year.
Who replaced ComfortDelGro?
Emperador Inc (SGX:EMI), the first Philippine Stock Exchange-primarily listed firm to hold a secondary listing on the SGX, in the end replaced ComfortDelGro on the STI list.
However, with the reopening of the economy, we have seen a strong earnings recovery for ComfortDelGro in FY2022 despite the inflationary pressure.
For investors who are interested in buying ComfortDelGro stock, here are 10 facts they should know about the company.
- ComfortDelGro is one of the world’s largest land transport companies with a total fleet size of about 46,600 buses, taxis,and rental vehicles.
- ComfortDelGro was formed in 2003 through the merger of two Singapore-based land transport companies, Comfort Group and DelGro Corporation.
- Its largest business segment is public transport services, which accounted for around 79.7% of total revenue. It comprises the operation of the Northeast and Downtown MRT lines in Singapore and the operation of buses in three countries — Singapore, Australia, and the UK.
- In FY2022, its overseas revenue contribution stood at around 41.9% of total revenue. Its largest overseas market is Australia, which contributed about 18.3% of total revenue.
- In Singapore, which accounted for the bulk of group operating profit, ComfortDelGro now has around 8,500 taxis and 600 private-hire cars.
- ComfortDelGro maintains its dividend policy to pay out at least 50% of profit after tax and minority interest (PATMI). In FY2022, a final dividend – that accounted for a 70% dividend payout – was announced along with a special dividend declared based on the 100% exceptional gain on the disposal of Alperton. The special dividend was declared in honour of ComfortDelGro’s 20th anniversary of its SGX listing.
- Australia Public Transport Services were successfully awarded region 4, 12 and 14 contracts in New South Wales. The robust tendering process, which attracted keen competitive submissions from numerous operators, concluded in November 2022 with new contractual terms commencing from Q2 2023 at a revised rate which is lower than the current service fee.
- Driver supply and inflationary cost pressures remain a challenge for ComfortDelGro’s Public Transport Services.
- ComfortDelGro has a strong positive operating cash flow. In FY2022, the Group repaid its borrowings and reduced its gross gearing ratio to 10.5%, from 12.8%. The Group, which is in a net cash position, continues to monitor interest rates while managing borrowings.
- Here are some positive comments from management.
- Rail ridership in Singapore, bus charter in Australia and coach services in the UK are continuing to recover after the relaxation of COVID-19 restrictions.
- Singapore Taxi revenues are expected to improve, and driver earnings are expected to remain healthy as demand for taxis and PHVs in Singapore remains strong.
- Taxi revenues in China are expected to improve after the recent significant relaxation of COVID-19 restrictions in December 2022.
Challenges remain for ComfortDelGro
Despite the strong earnings recovery in FY2022, and the expectations of an improvement in FY2023, the rising costs and shortages of taxi supply remain big challenges to ComfortDelGro.
This is why the company’s share price has remained 9.8% lower than a year ago, despite the recovery in earnings.
Investors who are keen to invest in ComfortDelGro should lower some of their expectations as the road to recovery ahead could be a bumpy ride.
Nonetheless, with a forward price-earnings ratio (PE) of 13.6 times, it is trading at a relatively attractive valuation as compared to the PE of 16 times back in 2015.
Disclaimer: ProsperUs Investment Coach Billy Toh doesn’t own shares of any companies mentioned.
Billy is passionate about the capital market and believes in investing for the long haul. Prior to this, he was an economist at RHB Investment Bank, covering Thailand and Philippines market. He also worked as a financial journalist at The Edge Malaysia and has experience working with an asset management firm. Aside from the capital market, Billy loves a good conversation over a cup of coffee, is a fitness enthusiast and a tech geek.