Comprehensive Analysis of ComfortDelGro’s Financial Report
Broker Name: Maybank Research Pte. Ltd.
Date of Report: November 15, 2024
Introduction
ComfortDelGro, a renowned land transport conglomerate, recently released its financial report, providing a detailed overview of its current standing and future prospects. This report offers a comprehensive analysis, highlighting the company’s diverse operations across Singapore, Australia, UK/Ireland, and China. Let’s delve into the specifics of ComfortDelGro’s performance, strategic direction, and market position as outlined in the report.
Financial Performance Overview
The report reveals that ComfortDelGro’s 3Q24 results are in line with expectations. The core PATMI (Profit After Tax and Minority Interests) stood at SGD55.8 million, marking a 16% year-on-year and 5.9% quarter-on-quarter increase. This performance brings the company’s 9M24 earnings to SGD152.8 million, a 19% rise compared to the previous year. These figures achieve approximately 75% of Maybank IBG’s and 73% of consensus FY24 estimates.
Impacts of Addison Lee Acquisition
The acquisition of a 97%-owned interest in Addison Lee (AL) is a significant development for ComfortDelGro. This major M&A is expected to be accretive, although there are reservations due to the challenging operating and regulatory environment in the UK. Consequently, the report downgrades the stock to a ‘Hold’ with a lower DCF-based target price of SGD1.60, based on an 8.3% WACC and 0.5% long-term growth.
Public Transport and Taxi Market Dynamics
ComfortDelGro’s public transport revenue in 3Q increased by 7.4% year-on-year and 5.2% quarter-on-quarter to SGD815 million. This growth was driven by improved margins from UK bus contract renewals and seasonality in scheduled bus activities. Additionally, the company has been awarded three bus franchises in Victoria, Australia, commencing in July 2025, promising a 30% growth in the region’s public bus business. However, the industry-wide driver shortages in Australia pose a challenge, narrowing the operating margin by 2.4 percentage points year-on-year to 4.3% in 3Q.
Competitive Landscape in Singapore’s Taxi and Private Hire Market
The turnover from the taxi and private hire sectors grew by 21.9% year-on-year to SGD179.9 million in 3Q, partially due to the acquisition of A2B Australia. However, the increased competition from other ride-hailing platforms has led to lower Zig booking volumes in Singapore, affecting the EBIT margin, which contracted by 2.2 percentage points quarter-on-quarter to 19.2%. The Land Transport Authority’s ongoing review of the P2P industry adds to the competitive tension.
Financial Metrics and Projections
The report provides detailed financial metrics, highlighting ComfortDelGro’s revenue, EBITDA, and core net profit projections for FY24E, FY25E, and FY26E. The company’s EBITDA is expected to grow steadily, reaching SGD754.3 million by FY26E. The net gearing ratio is anticipated to increase post Addison Lee acquisition, reflecting a shift towards a more asset-heavy business model.
ESG and Sustainable Practices
ComfortDelGro is actively engaging in sustainable practices, as evidenced by its medium and long-term environmental goals. The company is transitioning to electric and hybrid vehicles and implementing energy-efficient designs. It aims to achieve a 20% reduction in GHG emissions intensity by 2023 and has already made significant strides in increasing the share of renewable electricity.
Risk Management and Governance
The report outlines the company’s exposure to environmental, social, and governance (ESG) risks, emphasizing its efforts to mitigate these through strategic governance and sustainable finance initiatives. ComfortDelGro’s board comprises 10 directors, with 30% female representation, and it maintains robust governance practices with independent directors chairing key committees.
Conclusion
ComfortDelGro’s financial report paints a picture of a company navigating a complex landscape with strategic acquisitions and a focus on sustainable growth. While challenges exist, particularly in the competitive and regulatory environments, the company’s diversified operations and commitment to ESG principles position it favorably for future growth.
