Executive Summary
The report outlines a robust growth outlook for ComfortDelGro as it gears up for further expansion. The analysis is driven by strong results in 4Q24 with improved UK bus operations and strategic acquisitions. The broker’s detailed commentary presents a forward outlook with an attractive forecast of FY25F earnings growth of approximately 15% year‐on‐year, reinforced by continued operational improvements, overseas expansion, and ESG initiatives. The stock is reaffirmed with an “Add” recommendation with a target price of S\$1.80, implying an upside of 27.7% from the current price of S\$1.41.
Company Overview: ComfortDelGro
ComfortDelGro, one of Singapore’s leading public transportation operators, has posted a 4Q24 net profit of S\$58 million, in line with expectations. The overall FY24 net profit reached S\$211 million, growing by 17% year‐on‐year. The company recorded a 14% year‐on‐year growth in EBIT, bolstered by the standout performance of the UK bus business – particularly driven by favorable contract renewals – and the profitability turnaround enabled by the CMAC acquisition in early 2024.
Financial Performance and Key Metrics
The quarterly financial highlights indicate that while net profit remained steady on a qoq basis, EBIT improved by 14% on a yearly basis to S\$91 million, demonstrating the company’s strong core operational performance. Final dividend per share (DPS) for 4Q24 was proposed at 4.25 Scts, increasing the FY24 DPS from 6.66 Scts to 7.77 Scts.
Detailed financial summaries indicate revenue growth from S\$3,880 million in Dec-23A to an expected S\$5,136 million in FY25F, with corresponding improvements in operating EBITDA, net profit, and core EPS. The operational efficiency is further reflected in healthy margins and favorable gearing metrics, ensuring that the company remains well-capitalized.
Segment Breakdown & Business Drivers
ComfortDelGro’s diversified business segments include Public Transport, Taxi/PHV, Other Private Transport, and ancillary services like Inspection & Testing. In the latest quarter, the Public Transport segment experienced modest revenue changes, while the Taxi/PHV segment showcased robust growth with a 61.7% increase year‐on‐year. The Other Private Transport segment, although facing volatility, reported a strong turnaround in EBIT in the recent period, and ancillary inspection services maintained steady margins.
The report underscores that the UK bus business, with contributions from renewed contracts and double-digit EBIT margins, is the primary driver for overall growth. Furthermore, the strategic incorporation of acquisitions including Addison Lee, A2B, and CMAC are set to drive approximately 15% EPS growth in FY25F, underpinned by an anticipated 18% yoY rise in EBIT.
Overseas Bus Business and Acquisitions
A significant theme of the report is the accelerated contribution from ComfortDelGro’s overseas bus operations, particularly in the UK and Australia. The UK segment’s performance is enhanced by Metroline’s ability to secure highly profitable contract renewals, while the Australian business, despite facing industry-wide driver shortages, showed early signs of improvement early in 2025. The commencement of new public bus contracts in Greater Manchester and Victoria is expected to bolster revenue and EBIT further in FY25F.
The report highlights that overseas operations provide a solid tailwind for the company, supporting its revenue and profit outlook amid rising interest costs due to higher borrowings for acquisitions. Overall, even as interest expenses increase by approximately 30% year‐on‐year, the company’s low gearing of around 6% ensures financial stability.
ESG and Sustainability Focus
ComfortDelGro demonstrates a comprehensive commitment to sustainability and ESG principles. With a pledge to achieve a 55% reduction in greenhouse gas emission intensity by 2032 (base year: 2019), the company is actively transforming its global fleet by increasing the proportion of hybrid and electric vehicles. In Singapore, hybrid/electric vehicles form 48% of the fleet, compared to 67% in China, 22% in Australia, and 24% in the UK. The company’s impressive safety and reliability metrics, exemplified by the Downtown Line’s record-setting mean kilometre between failure (MKBF), add credence to its high operational standards.
ComfortDelGro’s repeated inclusion in the Dow Jones Sustainability Index (DJSI) – Asia Pacific for six consecutive years is a testament to its ongoing ESG initiatives. During the Covid-19 outbreak, the company further showcased its social responsibility by providing rental waivers and rebates for taxi drivers.
Peer Comparison and Listed Companies Analysis
The report includes an extensive peer comparison, benchmarking ComfortDelGro against several prominent listed companies across different regions. The detailed table provides insights into key metrics such as current price, target price, market capitalization, forecast EPS growth, core P/E, dividend yield, ROE, and EV/EBITDA ratios.
Singapore – ComfortDelGro:
ComfortDelGro remains the centerpiece of the analysis with an “Add” recommendation, a current price of S\$1.41, and a target price of S\$1.80. With a forecast FY25F yield of 6.4% and a forward P/E based on FY26F of 16x, the company is poised for strong EPS growth and margin enhancements driven by its UK and overseas bus business.
Thailand – BTS Group:
BTS Group in Thailand is noted with a “Hold” recommendation. With a strong market cap of US\$3,367 million and robust revenue figures, BTS Group is expected to face pressures on its growth profile in the current environment, despite its solid market position.
Hong Kong – MTR Corporation Ltd:
MTR Corp Ltd, while not rated in the report, is a major player in Hong Kong’s transportation sector with significant infrastructure and operational scale. The company’s solid earnings and dividend yield attract investors who are less focused on aggressive growth.
Australia – Kelsian Group Ltd and Downer EDI Ltd:
Both Kelsian Group and Downer EDI in Australia are not rated by the report. Kelsian Group, with a current price of AU\$3.14 and a market cap of US\$522 million, faces challenges from industry-wide economic pressures. Downer EDI, with a market cap of US\$2,307 million, presents a modest operational growth even as it contends with higher costs in the sector.
United Kingdom – Mobico Group PLC and Firstgroup PLC:
Mobico Group maintains a not-rated status with a target price of £70.00 and a market cap of US\$532 million. Firstgroup PLC, with a target price of £162.0 and a market cap of US\$1,193 million, is forecast to experience margin pressures but continues to be a key public transport operator in the UK.
Japan – Key Railway Operators:
The Japanese peers include Nankai Electric Railway Co Ltd, Seibu Holdings Inc, Central Japan Railway Co, Keisei Electric Railway Co Ltd, and Tobu Railway Co Ltd. While none of these companies have explicit ratings in the report, they are benchmarked against key valuation metrics such as core P/E, dividend yields, and return on equity. These companies possess varying levels of operational efficiency and market capitalization, with dividend yields and relative valuations that show average performance when compared to their regional peers.
The peer group summary provides a “Simple average” of key metrics, highlighting a core P/E averaging around 18.9x to 17.5x, with dividend yield figures supporting a conservative yet stable outlook for the region.
Recommendation Framework & Spitzer Chart Analysis
The recommendation framework is structured around three key ratings: Add, Hold, and Reduce. ComfortDelGro is firmly placed in the “Add” category, reflecting expectations that its total return will exceed 10% over the next 12 months. The total expected return comprises both capital appreciation – with the target price set at S\$1.80 – and an attractive forward net dividend yield of 6.4%.
The report also presents a breakdown of rating distributions among investment banking clients. With 67.4% of stock ratings assigned an “Add,” 22.2% a “Hold,” and 10.4% a “Reduce,” the overall sentiment leans strongly in favor of growth and positive performance. The accompanying Spitzer Chart, displaying two-year historical price trends, reaffirms the technical and fundamental strength of ComfortDelGro.
Detailed Financial Summary and Balance Sheet Overview
ComfortDelGro’s financial performance is bolstered by a steady trajectory in revenue, operating EBITDA, and net profit. Key financial ratios such as the operating EBITDA margin (ranging from 14.7% to 16.4%) and ROE (improving year-on-year) underline the company’s efficient operations. With projections showing increasing net profit margins, robust cash flow generation, and low net debt, the company is well-equipped to pursue its expansion strategy via both organic growth and strategic acquisitions.
The balance sheet is robust with a healthy mix of current and non-current assets, while the gearing ratio remains comfortably low at around 6%. With planned investments and a disciplined approach to capital allocation, ComfortDelGro continues to position itself favorably for future growth, ensuring that dividend payout ratios remain strong while retaining sufficient capital for reinvestment.
Conclusion
In summary, the detailed analysis of ComfortDelGro reveals a company that is not only thriving on the strength of its core operations in the UK and overseas markets but is also poised for significant growth through strategic acquisitions and diligent cost management. The robust financial performance, combined with a focused commitment to sustainability and a dominant market position, supports the “Add” recommendation with a target price set at S\$1.80.
Complemented by a comprehensive peer comparison across regions – including noted players in Thailand, Hong Kong, Australia, the United Kingdom, and Japan – the report provides a full spectrum analysis that is invaluable for institutional and professional investors alike. The stability in key metrics, attractive dividend yields, and solid operational margins across the board reaffirm that ComfortDelGro remains a compelling investment prospect in the public transportation sector.
