UOB Kay Hian Research Report
Date: April 15, 2025
ComfortDelGro Corporation: Strong Growth Prospects Ahead
ComfortDelGro Corporation, a leading land transportation services provider, has demonstrated resilience in the face of escalating trade tensions and unprecedented US tariffs. Despite these challenges, the company’s defensive nature of its business operations is expected to shield its earnings from significant impact.
Company Overview
ComfortDelGro Corporation Limited provides a range of services including bus, taxi, rail, car rental and leasing, automotive engineering services, inspection and testing services, driving centers, insurance broking, and outdoor advertising.
Key Financials:
GICS Sector: Industrials
Bloomberg Ticker: CD SP
Shares Issued: 2,166.1 million
Market Cap: S$3,205.8 million (US$2,397.8 million)
3-month Average Daily Turnover: US$8.0 million
Earnings Preview: Strong Growth Expected
ComfortDelGro is expected to report strong year-on-year growth in 1Q25, driven by its defensive business operations and recent acquisitions. The company’s management noted that UK bus contract renewals are ongoing, which would lead to a better margin profile for 2025.
Revenue: S$1,205 million (+20% yoy, +2% qoq)
PATMI: S$58 million (+46% yoy, +2% qoq)
Segmental Performance
Public Transport: UK margins are expected to expand, driven by contract renewals and new bus tenders. Margins for UK bus tender bids are still within 10-15% and are expected to remain at these levels for 2025.
Taxi and Private Hire: Stiff competition from ride-hailing peers is expected to continue, with new entrants such as Geolah and Trans-Cab intensifying competition.
UK Bus Contract Renewals: Ongoing contract renewals are expected to boost revenue and earnings, with higher margins from the UK bus business.
Financial Highlights
Year 2023 2024F 2025F 2026F 2027F
Net Turnover (S$m) 3,880 4,477 5,024 5,208 5,359
EBITDA (S$m) 636 691 798 812 838
Operating Profit (S$m) 272 323 403 421 448
Net Profit (S$m) 181 211 250 264 285
Valuation and Recommendation
Maintain BUY: UOB Kay Hian maintains a BUY recommendation with an unchanged target price of S$1.76, pegged to the same 16x 2025F PE, CD’s five-year average long-term PE.
Decent Dividend Yield: The company offers a decent dividend yield of 6.1% for 2025, underpinned by strong earnings growth from the taxi segment.
Share Price Catalysts
Bus Tender Contract Wins: Potential contract wins and renewals could drive growth.
Increase in Taxi Commission Rates: Changes in commission rates could impact earnings.
Earnings-accretive Overseas Acquisitions: Future acquisitions could drive growth and profitability.
Risks and Considerations
Trade Tensions: Escalating trade tensions and US tariffs may have a minimal impact on ComfortDelGro’s earnings due to its defensive business nature.
UK Bus Contract Renewals: Margins are expected to remain high, with a gradual increase towards low-teens percent in the medium to long term.
Conclusion
ComfortDelGro Corporation remains a compelling investment opportunity, with a strong growth outlook and decent dividend yield. The company’s defensive business operations and recent acquisitions are expected to drive growth, making it an attractive pick for investors.
Recommendation: Maintain BUY with a target price of S$1.76, driven by a decent dividend yield and strong earnings growth prospects.
Analysts: Llelleythan Tan Yi Rong and Heidi Mo
Contact: +65 6590 6624 / +65 6590 6630
UOB Kay Hian Research Report April 15, 2025
ComfortDelGro Corporation: Resilient Growth Ahead