UOB Kay Hian Private Limited
Date of Report: 11 June 2025

ComfortDelGro: Strategic Growth Amid New Taxi Competition and Global Expansion Plans

Overview: ComfortDelGro’s Market Position and Strategic Outlook

ComfortDelGro Corporation Limited (CD), a leading player in Singapore’s land transport sector, operates an extensive range of services including bus, taxi, rail, car rental and leasing, automotive engineering, inspection and testing, driving centres, insurance broking, and outdoor advertising. With a current share price of S\$1.41 and a target price of S\$1.71, UOB Kay Hian maintains its BUY rating, highlighting a 21.6% upside potential. CD’s strong earnings momentum, attractive 2025 dividend yield of 6%, and resilience amid market volatility position it as a conviction pick for the second half of 2025.

Key Stock Data

• GICS Sector: Industrials
• Shares Issued: 2,166.8 million
• Market Cap: S\$3,076.8 million (US\$2,395.0 million)
• 3-Month Avg Daily Turnover: US\$11.2 million
• 52-Week High/Low: S\$1.55 / S\$1.32
• FY25 NAV/Share: S\$1.22
• FY25 Net Cash/Share: S\$0.17

Emerging Taxi Competition: The Entry of GrabCab

ComfortDelGro is set to face increased competition starting in the second half of 2025 as GrabCab, a subsidiary of GrabRentals, enters Singapore’s domestic street-hail taxi segment. Launching in July 2025 with a fleet of 40 electric/hybrid vehicles, GrabCab will become the sixth taxi operator in Singapore. GrabCab’s daily rental rates (S\$117) are closely aligned with existing operators such as ComfortDelGro (S\$110–S\$120, depending on model), and its metered fare structure mirrors industry standards.
To attract drivers, GrabCab is offering a suite of incentives:

• Safe driving bonus of S\$1,000 for every 12 months accident-free
• 1% bonus on fares for drivers completing 500–700 monthly trips
• 40% fuel discounts and up to 25% discounts on electric vehicle charging
• Welcome bonuses of S\$1,888/S\$3,888 for the first 100 drivers on 12/36 month contracts
• Full sponsorship for Taxi Driver’s Vocational Licence (TDVL) applications

GrabCab has already received 700–800 applications, selecting 400–500 drivers with TDVLs and clean safety records.
Despite these offerings, ComfortDelGro’s competitive positioning remains robust due to:

• Similar daily rental rates to GrabCab
• Lower online booking commission (7%) versus GrabCab’s likely 10–25%

The impact is expected to be marginal since GrabCab’s potential 800-taxi fleet would only represent a 5% domestic market share. Street-hail trips constitute just 10% of all point-to-point (P2P) rides in Singapore, and ComfortDelGro holds a dominant 65% share in this niche.

Financial Performance and Forecasts

Global Expansion: Bidding for Melbourne Metro

ComfortDelGro is actively pursuing global growth, recently announcing its intention to bid for a major metro contract in Melbourne, Australia. The consortium includes UGL (Australia), East Japan Railway, and Marubeni Corp. The Melbourne metro is Australia’s largest suburban rail network, spanning 405 km with 17 lines and 222 stations, generating approximately S\$2 billion in annual revenue. Assuming a 25% stake and 5–6% operating margins, ComfortDelGro could see an operating profit increase of S\$25–30 million, representing a 13–15% uplift to the 2027 public transport operating profit and 5–7% to the group’s overall annual operating profit.

Multi-Modal Transport Strategy

A successful Melbourne rail bid would enable ComfortDelGro to replicate its integrated rail-taxi-bus model (as seen in Singapore) in Australia. The company is expected to expand this strategy into adjacent markets such as the UK and New Zealand, leveraging its growing rail contract portfolio for future bus and taxi service launches.

Operational Insights: Segment Performance and Outlook

Public Transport: UK Margin Expansion

ComfortDelGro’s UK operations are experiencing margin improvements, with ongoing bus contract renewals expected to result in a better profile for the rest of 2025. UK bus tender bid margins remain robust at 10–15%. More contract renewals are anticipated from 2Q25 onward, excluding the Addison Lee acquisition. Margins in the UK business are forecasted to trend towards high single-digit to low-teens percentages over the medium to long term.

Singapore and Australia Dynamics

Rising domestic rail ridership and fare increases (from December 2024) should boost Singapore rail revenue. However, softer margins from the renewed Seletar bus package (starting March 2025) may offset some gains. In Australia, the bus driver shortage is easing but is not expected to yield significant immediate margin improvements.

Taxi and Private Hire: Competitive Pressure Persists

Intense competition from ride-hailing rivals is expected to persist, exerting downward pressure on completed bookings and overall commission income. Chinese taxi rentals are anticipated to remain subdued amid economic slowdown. Nevertheless, full-year contributions from recent acquisitions (A2B and Addison Lee) are projected to support the taxi segment’s growth momentum.

Earnings, Valuation, and Investment Recommendation

No changes have been made to PATMI estimates. The target price remains at S\$1.71, pegged to 16x 2025F PE (CD’s five-year average). With a strong 2025 dividend yield of 6%, attractive valuation, and anticipated earnings growth, ComfortDelGro stands out as a defensive yet high-potential investment.

Potential Share Price Catalysts

• Winning new bus tender contracts
• Increases in taxi commission rates
• Earnings-accretive overseas acquisitions

Recent Rail Contract Wins

Key Financial Metrics and Ratios

• EBITDA Margin (2025F): 15.9%
• Pre-tax Margin (2025F): 7.3%
• Net Margin (2025F): 4.8%
• ROA (2025F): 4.2%
• ROE (2025F): 9.2%
• Debt to Total Capital (2025F): 25.9%
• Net Debt/(Cash) to Equity (2025F): 13.5%
• Interest Cover (2025F): 16.4x

Conclusion

ComfortDelGro’s strong fundamentals, attractive dividend yield, and strategic expansion into international rail markets position it as a top defensive pick for investors seeking growth and stability in the transportation sector. The anticipated impact of GrabCab’s entry appears limited, while overseas ventures and new contract wins are poised to drive earnings growth in the coming years. With a solid track record and ongoing transformation, ComfortDelGro remains a compelling investment opportunity as it navigates both competitive threats and new global frontiers.