Overview of ComfortDelGro Corporation

ComfortDelGro Corporation (CD SP) is a global leader in land transportation services, offering a diverse range of services such as bus, taxi, rail, car rental, automotive engineering, inspection and testing, driving centers, insurance broking, and outdoor advertising. With a market capitalization of S\$3.01 billion (US\$2.24 billion), the company is a prominent player in the industrials sector.

Analyst Recommendation: A Convincing Buy

The analysts at UOB Kay Hian have maintained a “BUY” rating for ComfortDelGro with a target price of S\$1.77, representing a potential upside of 27.3% from its current share price of S\$1.39. The recommendation is underpinned by robust earnings growth, a strong dividend yield of 5.9% for 2025, and attractive valuation levels.

2024 Earnings Preview: Positive Momentum Expected

ComfortDelGro is gearing up to release its full-year 2024 financial results on February 27, 2025. The company has demonstrated steady progress across its key business segments, which are expected to support its strong performance in the fourth quarter of 2024 and set the stage for further growth in 2025.

Public Transport Segment

The public transport segment is a key driver of ComfortDelGro’s revenue. Domestic rail ridership increased by 1.6% year-on-year in December 2024, supported by the return to office mandates in Singapore. For the fourth quarter, ridership rose by 1.2% year-on-year, further bolstered by a 6% fare hike implemented in December 2024. This price adjustment is expected to enhance profitability in the coming quarters.

In the UK, ongoing bus contract renewals are anticipated to improve margins, which have been steadily rising from 0.4% in Q1 2024 to 6.1% in Q3 2024. Management expects these margins to trend toward high-single-digit to low-teens percentages over the medium to long term. Seasonal factors such as increased chartering activities are also expected to contribute to Q4 2024 profitability.

For Q4 2024, revenue is projected to reach S\$800 million (up 4.7% year-on-year), with operating profit estimated at S\$40 million (up 16.4% year-on-year). Full-year 2024 revenue and operating profit are forecast at S\$3.15 billion (+6.5% year-on-year) and S\$132 million (+10% year-on-year), respectively.

Taxi Segment

Despite stiff competition from ride-hailing platforms, ComfortDelGro’s taxi segment is poised for growth. Ride-hail trips accounted for 89.3% of total point-to-point trips in Singapore as of November 2024, slightly up from 89.2% in October 2024. However, the entry of new competitors such as Geo Lah and Trans-cab Services in Q1 2025 poses risks to the company’s online taxi booking volumes.

The taxi segment is expected to benefit from acquisitions, including A2B and Addison Lee. While significant earnings contributions from Addison Lee are anticipated in Q1 2025, the segment’s revenue for Q4 2024 is estimated at S\$174 million (+16.6% year-on-year), with operating profit at S\$37 million (+6.2% year-on-year). For the full year 2024, revenue and operating profit are forecast at S\$681 million (+18.6% year-on-year) and S\$136 million (+27.7% year-on-year), respectively.

Global Expansion and Rail Contracts

ComfortDelGro continues to expand its global footprint. The company, in partnership with French transport operator RATP Dev, is bidding for the operation and maintenance of the Copenhagen metro system, a 12-year contract worth an estimated €1.5 billion. If successful, ComfortDelGro’s 45% stake in the project could contribute an annual operating profit of €5 million to €6 million (S\$7 million to S\$8 million).

Recent rail contract wins include the Auckland Rail project (S\$1.13 billion), Paris Line 15, Jurong Region Line (S\$750 million), and Stockholm Metro (S\$5.1 billion). These contracts highlight ComfortDelGro’s growing expertise in the rail sector and its commitment to international expansion.

Financial Highlights and Valuation

ComfortDelGro’s financial performance reflects its resilience and growth potential. Key metrics are as follows:

• 2024 revenue forecast: S\$4.47 billion (+15.3% year-on-year)
• 2024 EBITDA forecast: S\$678 million (+6.6% year-on-year)
• 2024 net profit forecast: S\$210 million (+16.6% year-on-year)
• 2025 dividend yield: 5.9%
• 2025 price-to-earnings ratio: 16x, aligned with the five-year average

The company’s balance sheet remains robust, with a projected cash position of S\$868 million by the end of 2024. The net debt-to-equity ratio is expected to improve to -4.4% in 2024 and -7.5% in 2025.

Investment Thesis and Share Price Catalysts

ComfortDelGro’s strong fundamentals, growing global presence, and attractive dividend yield make it a compelling investment. The recent dip in its share price presents an attractive entry point for investors. Key catalysts for share price appreciation include:

• Winning bus tender contracts
• Increased taxi commission rates
• Earnings-accretive overseas acquisitions

With a target price of S\$1.77 and a “BUY” recommendation, ComfortDelGro is positioned as a conviction pick for the first half of 2025.