OCBC Investment Research
15 May 2025

ComfortDelGro Corporation: Poised for Growth with Defensive Earnings and Strategic Expansion in 2025

Overview: ComfortDelGro’s Resilient Growth Story

ComfortDelGro Corporation (CMDG.SI), a global leader in land transport, is navigating 2025 with steady growth and a robust, defensive earnings profile. Backed by a strong track record and a forward-looking management team, ComfortDelGro (CD) is actively consolidating its position through strategic acquisitions and expansion into new mobility solutions. OCBC Investment Research reiterates its BUY rating, with an increased fair value estimate of SGD 1.71, reflecting confidence in the company’s growth trajectory.

Company Profile: A Diversified Transport Powerhouse

Formed in 2003 from the merger of Comfort Group and DelGro Corporation, ComfortDelGro now operates in seven countries. Its businesses span bus, rail, taxi, private hire vehicles, car rental and leasing, automotive engineering, inspection and testing services, driving centers, insurance broking, and outdoor advertising.

Key Revenue Segments (FY24):

• Public Transport: 69.4%
• Taxi & Private Hire: 16.7%
• Other Private Transport: 9.1%
• Inspection & Testing Services: 2.6%
• Others: 2.2%

Geographical Revenue Breakdown (FY24):

• Singapore: 50.9%
• UK & Ireland: 28.7%
• Australia: 18.1%
• China: 2.2%
• Others: 0.0%

Strategic Growth Pillars Fueling Future Expansion

ComfortDelGro’s growth strategy is anchored on three main pillars:

1. Defending and Growing the Core Business: Focused on maintaining high service quality to differentiate its core operations.
2. Expansion into New Businesses: Aggressively venturing into electric vehicle (EV) charging and EV-as-a-Service to capture emerging opportunities in mobility.
3. Building Future Capabilities: Investing in autonomous vehicle (AV) fleet operations and integrating artificial intelligence (AI) for data-driven fleet management.

While these new engines of growth are still developing, ComfortDelGro has demonstrated its commitment to inorganic growth with multiple acquisitions in FY24, setting the stage for enhanced contributions in FY25.

Financial Performance: Robust Results Amid Broad-Based Growth

1Q25 Results at a Glance

• Revenue: SGD 1.17 billion (up 16.4% year-on-year)
• Operating Profit: SGD 81.5 million (up 45.5% year-on-year)
• PATMI (Profit After Tax and Minority Interests): SGD 48.3 million (up 19% year-on-year), with PATMI margin stable at 4.1%

These numbers represent 24% (revenue) and 22% (PATMI) of OCBC’s full-year forecasts—firmly in line with expectations.

Segmental Performance Highlights

• Public Transport: Revenue rose 2.6% YoY to SGD 760.1 million, boosted by the launch of UK Metroline Manchester contracts in January 2025. Singapore rail fare increases offset a lower contribution after the Jurong West bus package handover in September 2024. Core operating profit soared 52.9% YoY to SGD 36.4 million, as operating margins expanded 1.6 percentage points on successful UK contract renewals.
• Taxi & Private Hire: Revenue surged 74% YoY to SGD 258.1 million, driven by the acquisitions of Addison Lee and A2B. However, Q1 remains a seasonally weaker quarter for this segment, resulting in some operating margin pressure—core OP rose by a slower 51% YoY to SGD 35.2 million. The competitive landscape in Singapore is heating up, with GrabCab entering street-hail services, while China’s taxi business remains soft.
• Other Private Transport: Revenue jumped 44.3% YoY to SGD 94.3 million, contributing SGD 0.8 million in core OP (a reversal from a loss in 1Q24) on higher volumes from Singapore private buses and non-emergency patient transport in Australia. Notably, CMAC secured a contract with UK OTA ‘On The Beach’, further supporting growth.
• Inspection & Testing Services: Revenue increased 18.0% YoY to SGD 32.8 million, with operating profit up 8.4% YoY to SGD 9 million.
• Other Segments: Revenue rose 8.9% YoY to SGD 24.5 million, with OP more than doubling to SGD 3 million, attributed to lower business development costs.

Key Financial Tables

Valuation and Peer Comparison

ComfortDelGro’s valuation remains attractive relative to regional peers. The company trades at a forecasted FY25E P/E of 13.8x and an EV/EBITDA of 5.3x, with a dividend yield of 5.7%. Return on equity is set to improve from 9.2% in FY25E to 9.8% in FY26E.

Dividends: Stable and Growing Payouts

ComfortDelGro has maintained a consistent dividend policy, with dividends per share (DPS) steadily increasing from 1.4 S cents in 2020 to 7.8 S cents in 2024. The payout ratio for FY24 stands at a healthy 79.94%.

ESG Performance: Strength in Governance, Room for Improvement

ComfortDelGro’s ESG score continues to improve year-on-year, with notable strength in Governance due to robust internal controls, ethics audits, and whistleblower protection mechanisms. However, the company scores below the industry average for Labour Management, Carbon Emissions, and Health and Safety. Operating mainly in markets with low corruption risk, ComfortDelGro’s ESG performance is still ahead of many peers.

Investment Thesis and Catalysts

• Defensive Earnings: Earnings remain insulated from tariff risks due to domestic market exposure, though a recession could cause secondary impacts on non-public transport demand.
• Growth Catalysts: Potential upside from earlier-than-expected breakeven on Singapore’s Downtown Line, faster recovery in transport activities, and earnings-accretive acquisitions or contract wins/renewals.

Risks to Watch

• Inflation and supply chain pressures could impact margins.
• Intensifying competition, particularly from Grab, Gojek, and new entrants like GrabCab, may erode market share.
• Loss of key bus contracts without offsetting wins could dampen performance.

Conclusion: A Buy for Defensive Growth and Strategic Transformation

ComfortDelGro stands out for its diversified business model, strong regional presence, defensive earnings, and commitment to innovation. With a refreshed fair value target of SGD 1.71, a solid dividend yield, and visible growth drivers, the stock remains an attractive BUY for investors seeking exposure to the transportation sector’s transformation in Singapore and beyond.

Analyst Declaration

The analyst certifies independence and objectivity in the preparation of this report. No financial interests or conflicts of interest relating to the covered companies exist.

Disclaimer

This article is for informational purposes only and does not constitute investment advice. Investors should consult a financial adviser before making investment decisions.