OCBC Investment Research
15 May 2025

ComfortDelGro Corporation: Resilient Growth, Strategic Expansion, and Strong Dividends in 2025

Investment Overview: ComfortDelGro’s Defensive Strength and Growth Trajectory

ComfortDelGro Corporation (CD), a global leader in land transport, is demonstrating robust, defensive earnings with a strong growth outlook for 2025. The company’s strategic acquisitions in 2024, continued innovation, and steadfast core operations have positioned it for further upside. OCBC Investment Research reiterates a BUY rating, increasing the fair value (FV) estimate to SGD 1.71. The stock last closed at SGD 1.52, providing a compelling upside for investors seeking stability and growth in the transportation sector.

Strategic Growth: Three Pillars for the Future

ComfortDelGro’s forward strategy centers on three core pillars:

• Defending and Growing the Core: The company maintains its industry leadership by prioritizing high service quality across its bus, rail, taxi, and vehicle services divisions.
• Expansion into New Businesses: CD targets emerging segments such as electric vehicle (EV) charging and EV-as-a-Service to diversify its revenue streams and capture future growth markets.
• Building Future Capabilities: The company is actively developing autonomous vehicle (AV) fleet operations and integrating artificial intelligence (AI) and data-driven fleet management for operational efficiency.

While its EV and AV initiatives are at an early stage, CD has executed several strategic acquisitions in FY24, with new contributions expected to boost performance in FY25 as the company consolidates its expanded platform.

Financial Performance: Strong Start to 2025

CD’s 1Q25 results met expectations, reflecting the impact of recent acquisitions and broad-based segment growth.

Key highlights:

• Revenue and operating profit grew 16.4% and 45.5% YoY, respectively.
• PATMI (Profit After Tax and Minority Interests) rose 19% YoY to SGD 48.3 million.
• PATMI margin remained stable at 4.1%.
• Q1 revenue and PATMI represented 24% and 22% of initial full-year forecasts, respectively.

Segment Analysis: Broad-Based Growth Across Divisions

Public Transport:

• Revenue climbed 2.6% YoY to SGD 760.1 million, aided by the UK Metroline Manchester contracts commencing January 2025.
• Singapore rail fare increases compensated for the loss of the Jurong West bus package post-September 2024.
• Core operating profit surged 52.9% YoY to SGD 36.4 million, with a 1.6ppt margin improvement driven by UK public bus contract renewals.

Taxi & Private Hire:

• Revenue soared 74% YoY to SGD 258.1 million, boosted by acquisitions of Addison Lee and A2B.
• Operating profit grew 51% YoY to SGD 35.2 million, but margins were seasonally pressured in Q1.
• Competitive intensity in Singapore is expected to rise with GrabCab’s entry into street-hail services, while the China taxi business remains soft.

Other Private Transport:

• Revenue jumped 44.3% YoY to SGD 94.3 million.
• Segment turned profitable, posting SGD 0.8 million in core operating profit (vs. a loss in 1Q24), driven by higher volumes in Singapore and Australia.
• CMAC secured a new contract with UK OTA On The Beach, supporting future growth.

Inspection & Testing Services:

• Revenue and operating profit rose 18.0% and 8.4% YoY to SGD 32.8 million and SGD 9 million, respectively.

Other Segments:

• Revenue increased 8.9% YoY to SGD 24.5 million.
• Operating profit more than doubled to SGD 3 million, driven by lower business development costs.

Financial and Dividend Summary: Sustained Growth and Payouts

Key ratios:

• Operating profit margin: 7.2% (FY24) rising to 8.3% (FY26E)
• Net profit margin: 4.7% (FY24) to 5.2% (FY26E)
• Dividend yield: 5.1% (FY24), 5.5% (FY25E), 6.0% (FY26E)
• ROE: 8.1% (FY24), 9.1% (FY25E), 9.6% (FY26E)

Valuation and Peer Comparison

ComfortDelGro trades at a modest premium to some regional peers given its earnings defensiveness, strong governance, and attractive dividend yield.

ESG Performance: Leadership in Governance, Room for Improvement in Environmental Metrics

ComfortDelGro has enhanced its ESG score over the years, particularly excelling in governance. The company operates primarily in low-corruption jurisdictions (Singapore, UK, Australia) and maintains robust control structures, including ethics audits and whistleblower protection. However, there is room for improvement in areas such as labour management, carbon emissions, and health and safety, though current ESG performance is still above many industry peers.

Key Catalysts and Risks

Potential Catalysts:

• Earlier-than-expected breakeven on Singapore’s Downtown Line
• Accelerated recovery in transport activity levels
• Earnings-accretive acquisitions and contract wins or renewals

Risks:

• Inflation and supply chain issues putting pressure on margins
• Aggressive expansion and marketing by ride-hailing competitors such as Grab and Gojek
• Loss of bus contracts without offsetting new wins

Company Snapshot: ComfortDelGro at a Glance

• Formed from the merger of Comfort Group and DelGro Corporation in 2003, both with roots in the 1970s
• Operates across seven countries: Singapore, UK, Australia, China, and others
• Core businesses: bus, taxi, rail, car rental, automotive services, inspection and testing, driving centers, insurance broking, outdoor advertising

FY24 Revenue Breakdown by Segment:

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

FY24 Operating Profit by Segment:

• Public Transport: 40.3%
• Taxi & Private Hire: 41.9%
• Other Private Transport: 5.2%
• Inspection & Testing: 10.7%

Geographical Revenue Mix (FY24):

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

Dividend Track Record (S cents):

• 2019: 10.5
• 2020: 1.4
• 2021: 4.2
• 2022: 8.5
• 2023: 7.8
• 2024: 7.8

Historical Financial Performance and Ratios

Conclusion: BUY on ComfortDelGro for Quality Growth and Dividends

ComfortDelGro stands out in the transportation sector for its strong core business, strategic expansion into future growth areas, and resilient financials. With improving profitability, attractive dividend yields, and robust governance, CD offers investors a defensive yet growth-oriented opportunity. The increased FV estimate of SGD 1.71 and maintained BUY rating reflect confidence in ComfortDelGro’s ability to deliver sustainable shareholder value through 2025 and beyond.