ComfortDelGro: Is the Stock Still a Buy After Earnings?

August 15, 2022

It’s been a year of volatility for stock market investors. However, for those of us in Singapore the local stock market has held up well.

So far in 2022, the benchmark Straits Times Index (STI) is up around 4.7%. One of the STI’s constituent stocks – ComfortDelGro Corporation Ltd (SGX: C52) – has done even better.

ComfortDelGro shares are up over 7% so far this year. One big reason has been the reopening of the local economy. That has seen it be positioned as one of the key beneficiaries.

As my colleague Billy pointed out in his recent article on ComfortDelgro, the company also has many growth drivers going forward.

So, with the company having reported its latest H1 2022 earnings last week, are ComfortDelGro shares still a buy? Let’s find out what investors need to know.

Revenue and PATMI rise along with costs

In the first half of 2022, ComfortDelGro saw its revenue rise 6.7% year-on-year to S$1.86 billion. This was driven by strong performance in its “public transport” segment.

Singaporeans may be more familiar with the company’s blue and yellow taxis. However, the majority of its business is actually generated from other forms of public transport.

These include the bus and rail operations that it owns all over the world.

ComfortDelGro’s public transport segment saw an 8% year-on-year rise in revenue during H1 2022, totalling S$1.49 billion (see below).

Elsewhere, its taxi revenue actually fell in the first half of 2022 to S$211.3 million.

ComfortDelGro segment revenue breakdown

Source: ComfortDelGro H1 2022 earnings presentation

On the crucial profit after tax and minority interests (PATMI) front, in H1 2022 ComfortDelgro saw a 27.7% year-on-year increase to S$118.7 million.

Operating costs also rose, climbing 9.2% year-on-year to S$1.53 billion on the back of higher fuel and electricity costs for its public transport segment.

Transitioning to a “new normal”

ComfortDelGro looks likely to see its business continue a transition into a “new normal” in the post-pandemic world.

That’s because most of the geographies it operates in – such as the UK, Ireland, Australia, New Zealand, and Malaysia – are seeing economic activity pick up.

The only exception to this would be China, where the company’s first-half revenue fell more than 20% versus the same period last year.

Importantly, its Singapore business contributes the lion’s share of normalised operating profit (see below).

Given its home market is such a large contributor to the overall group, the focus on the recovery here is understandable.

ComfortDelGro operating profit breakdown

Source: ComfortDelGro H1 2022 earnings presentation

Indeed, locally, there are opportunities. The company’s taxi business (while down year-on-year) could see better monetisation going forward.

That’s down to management’s observation that its taxi drivers in Singapore are witnessing higher bookings versus pre-Covid levels.

With a lower commission rate (currently 4%) for drivers when compared to Go-Jek (10%) and Grab (20%), ComfortDelGro has room to raise its rate in the second half of this year.

Dividend reward for shareholders

For ComfortDelGro’s interim dividend, the company announced a dividend per share (DPS) of 2.85 Singapore cents. That was up 35.7% year-on-year.

In addition, the company also announced a special dividend of 1.41 Singapore cents per share. This was in relation to 100% of its exceptional gain on a disposal of Alperton – a London property it owned.

Based on its latest share price of S$1.49 (and excluding the special dividend), ComfortDelGro shares are currently offering investors a 12-month forward dividend yield of 3.8%.

Given ComfortDelGro’s latest earnings, the company seems to be on the right track. However, for dividend investors, it’s worth watching its dividend payout ratio.

Management maintained its commitment to its dividend policy. This policy aims to pay out at least 50% of PATMI.

With the latest interim DPS making up 70% of H1 2022 PATMI, it’s a trend investors should monitor.

Overall, ComfortDelgro appears to be a strong candidate for a “reopening play” in the Singapore market. Beyond that, though, there are still questions to be answered over the consistency of its dividend payout.

Disclaimer: ProsperUs Head of Content & Investment Lead Tim Phillips doesn’t own shares of any companies mentioned.

Tim Phillips

Tim, based in Singapore but from Hong Kong, caught the investing bug as a teenager and is a passionate advocate of responsible long-term investing as a great way to build wealth.

He has worked in various content roles at Schroders and the Motley Fool, with a focus on Asian stocks, but believes in buying great businesses – wherever they may be. He is also a certified SGX Academy Trainer.

In his spare time, Tim enjoys running after his two young sons, playing football and practicing yoga.

Share this

Subscribe to our weekly
newsletter and stay updated!