Overview
UOB Kay Hian’s latest research report provides a comprehensive deep-dive into ComfortDelGro Corporation, the world’s second largest public-listed passenger land transport company. With a fleet of approximately 43,000 vehicles and an extensive business portfolio that spans bus, taxi, rail, car rental & leasing, automotive engineering, and maintenance services, the report offers a detailed discussion on the company’s current performance, segmental analysis, future prospects, valuation metrics, and potential share price catalysts. The recommendation remains a BUY with a target price of S\$1.76, representing an upside potential of +26.8% from the current share price of S\$1.39.
Company Background and Stock Data
ComfortDelGro Corporation stands as a diversified transport group operating in various segments including public transport, taxi & private hire, other private transport, and inspection & testing services. The company’s stock is classified within the Industrials sector and trades under the Bloomberg ticker CD SP. With 2,166.1 million shares issued and a market capitalization of approximately S\$3,010.9 million (US\$2,232.9 million), the stock enjoys healthy daily turnover and remains an attractive prospect for investors seeking steady earnings and consistent dividend yield.
The share price has shown resilience even when trading between a 52-week high of S\$1.53 and a low of S\$1.32, and the analysis reflects a fairly stable performance over the recent period. Notably, the company is committed to enhancing shareholder returns, exemplified by its dividend proposal which translates to an annualised yield of around 5.5%.
Financial Performance and 2024 Results
In 2024, ComfortDelGro posted a core PATMI (Profit After Tax and Minority Interest) increase of 18.0% year-on-year, in line with the full-year forecast. Revenue surged by 15.4% to S\$4,476.5 million, underpinned by robust performance across all business segments. The operating profit climbed by 18.7% year-on-year to S\$322.9 million, supported by an improved core operating profit margin of 7.6% and a core PATMI margin of 4.8%.
The report highlights that the strong performance in the core business was largely driven by the UK operations, which experienced higher margins due to better contract renewals and strategic acquisitions. The UK bus business in particular benefited from cost savings, such as those from a new electricity contract that is expected to deliver S\$10-12 million in savings in the second half of the year.
Segmental Deep Dive
Public Transport
The public transport segment contributed significantly to the overall revenue with a 5.0% year-on-year increase in 2024, reaching S\$3,107.5 million. Correspondingly, the core operating profit from this segment saw a 10.3% increase year-on-year to S\$129.9 million. Despite a slight softening in the fourth quarter, partly due to the handover of the Jurong West bus package, the segment remains a cornerstone of ComfortDelGro’s revenue base.
Outlook for this segment remains positive as the company continues to leverage ongoing UK bus contract renewals and cost indexations. Future margins are expected to trend towards high single-digit to low-teens percentages over the medium to long term, despite the gradual pace of contract renewals.
Taxi & Private Hire Vehicles
The taxi segment recorded impressive growth in 2024 with revenue surging by 30.3% year-on-year to S\$748.7 million and core operating profit expanding by 24.5% year-on-year to S\$132.0 million. This expansion was primarily driven by strategic acquisitions – notably A2B and Addison Lee – which injected strong new contributions into the business.
Although underlying performance excluding these acquisitions would have generated a core operating profit growth of 6.2% year-on-year, the specific contributions from A2B and Addison Lee have compensated for a period of weak underlying online booking levels, which were impacted by fierce domestic ride-hailing competition. The report also flags that stiff competition from new entrants such as Geolah and Trans-Cab will continue to challenge the taxi segment as it moves into 2025.
Other Segments
Other private transport and inspection & testing services have also contributed to the company’s revenue and earnings. Other private transport recorded remarkable growth with an increase of 182.5% year-on-year to S\$406.2 million, while inspection & testing services reported a moderate increase in revenue of 6.8% year-on-year to S\$117.0 million. Although margins in these segments have been under pressure in some quarters, the diversification within ComfortDelGro’s portfolio continues to enhance overall stability.
Earnings Revision, Risks, and Outlook
Despite the steady 2024 performance, UOB Kay Hian has revised its earnings expectations slightly for 2025-2026, lowering the core PATMI estimates by 1-3% due to higher cost assumptions. However, the long-term growth trajectory remains intact with the addition of a 2027 forecast. The new core PATMI estimates are pegged at S\$235.9 million in 2025, S\$264.1 million in 2026, and S\$284.8 million in 2027.
Risks include stiff competition in the ride-hailing space exacerbated by emerging entrants and subdued performance from taxi rentals in China due to economic deceleration. Still, the robust contributions from overseas acquisitions and the strategic advantages in taxi commission rates provide a positive outlook for the segment’s earnings momentum.
Valuation and Recommendation
UOB Kay Hian maintains a BUY recommendation for ComfortDelGro with a slightly lower target price of S\$1.76 compared to the previous S\$1.77. The valuation is anchored on a 16x 2025 forward PE, which aligns closely with the company’s five-year average long-term PE. The attractive dividend yield of 6.2% expected in 2025 further supports the investment thesis.
The share price catalyst themes include earnings-accretive overseas acquisitions and potential increases in taxi commission rates. With strong earnings growth expected from the taxi segment and margin betterment in the UK bus business, the recent dip in share price is seen as an opportune entry point for investors, with the report positioning ComfortDelGro as one of its conviction picks for the first half of 2025.
Financial Forecast and Key Metrics
The report provides an in-depth forward-looking financial forecast up to 2027, which underscores:
- Net turnover is projected to increase from S\$4,477 million in 2024 to S\$5,359 million in 2027.
- EBITDA is expected to grow from S\$691 million in 2024 to S\$838 million in 2027.
- Operating profit is forecasted to climb from S\$323 million in 2024 to S\$449 million in 2027.
- Net profit (adjusted) is anticipated to rise from S\$205.4 million in 2024 to S\$284.8 million in 2027 with corresponding improvements in EPS and margins.
- The balance sheet remains sound, with steady total assets and shareholders’ equity, while the net debt to equity ratio is maintained at attractive levels.
- Key profitability ratios such as EBITDA margin, pre-tax margin, net margin, ROA, and ROE are expected to improve modestly over the forecast period.
Additionally, detailed projections covering the profit & loss statement, balance sheet dynamics, and cash flow for the coming years were highlighted in the report, signifying a disciplined yet growth-oriented approach to financial management.
Conclusion
The UOB Kay Hian report on ComfortDelGro Corporation provides an exhaustive and engaging analysis of the company’s current performance and future prospects. With strong results in 2024 driven by key segments – particularly public transport and taxi & private hire – and a clear strategic roadmap supported by targeted acquisitions and margin enhancements, the company stands out as an appealing BUY recommendation at current levels. The attractive dividend yield combined with promising earnings growth and sound valuation metrics underpins the positive investment outlook for ComfortDelGro as it continues to execute on its long-term strategy.
