COMFORTDELGRO CORPORATION LTD

Business Summary

ComfortDelGro Corporation Ltd is a land and transport conglomerate listed on the Singapore Stock Exchange. 

The company was listed on the SGX in Mar 2003 but has its history stretched further way back 30 years ago. ComfortDelGro Ltd is the results of a successful merger between Comfort Group and DelGro Corporation. Back then, Comfort group was a taxi company while DelGro corporation was focused on the Singapore bus service. 

The merger between both companies eventually created the goliath company that we know of today. Ever since the merger, ComfortDelGro Corporation became a mammoth in the transportation businesses. 

Its presence encompasses managing part of Singapore’s Mass Rapid Transit (MRT) & public buses under SBS Transit Ltd, vehicle inspection under Vicom Ltd and the taxi business under the ComfortDelGro brand. 

In essence, should you ever require to travel within Singapore, most likely you will be contributing to ComfortDelGro Ltd’s revenue, be it via MRT, bus, taxi or driving your own car!

In addition to being a homegrown goliath in the transportation scene, ComfortDelGro Ltd also boasts an international presence. It has presences in the United Kingdom, Ireland, Australia, China and Malaysia.

Last update: 13.02.2020

Dividends (5/5): ⭐ ⭐ ⭐ ⭐ ⭐ 

Value (4/5): ⭐ ⭐ ⭐ ⭐ 

Financials (4/5): ⭐ ⭐ ⭐ ⭐ 

Growth (3/5): ⭐ ⭐ ⭐ 

Business (4/5): ⭐ ⭐ ⭐ ⭐ 

Reference: (i) MyKayaPlus Metrics Definition (ii) MyKayaPlus Metric Evaluation Scale

Management & Substantial Shareholders

The Chairman of ComfortDelGro Corporation is Mr Lim Jit Poh. Mr Lim has been a director of the company ever since the year 2003 and holds various positions in ComfortDelGro Corporation’s subsidiaries like SBS transit Ltd and VICOM Ltd. 

Another key management of ComfortDelGro Ltd is Mr Yan Ban Seng, who serves the Managing Director and Group Chief Executive Officer. Like Mr Lim, Mr Yan also holds multiple directorships in ComfortDelGro Ltd’s subsidiaries. 

Most of the key top management of ComfortDelGro Ltd has been with the company for many years. Given its multiple business verticals within the transportation segments, company management is intact and have the required experiences to manage and lead ComfortDelGro.

The major shareholder of ComfortDelGro is Blackrock Inc., an American based global investment management company. However, it holds less than 8% of the total interests of ComfortDelGro Ltd. Around 93% of ComfortDelGro Ltd’s shares are in the hands of the public, mainly held by investment companies.

Financial Performance

ComfortDelGro has been growing steadily until the year 2015. In the year 2016, the Group’s Automotive Engineering Services was 10% lower than the preceding year, caused by lower selling prices and volume of diesel sold to their taxi drivers. In the year 2017, the Group’s taxi business segment was under heavy competition by ride-hailing Uber Technologies Inc. & Grab Holdings Inc. The impacted taxi business also dragged down the Group’s Automotive Engineering Services. Since the year 2016, revenue contributed by the taxi segment has reduced by 50% versus the revenue contribution as of 2019.

The Return On Assets of ComfortDelGro has been stable in the range of 10% up till the latest the year 2019, where it starts to trend lower. Return On Equity saw a slight rise previously only to drop down a bit as of the year 2019. Although some business segments of ComfortDelGro has been seeing intense competition, its public transport division still saw healthy growth, which covered up for the revenue loss from other divisions. However, as of the latest year 2019, the revenue from new geographical expansion was not enough to cover up the lacerating wound of the taxi business segment.

Balance Sheet

YearAssets (SGD’000)Liabilities (SGD’000)Equities (SGD’000)Gearing Ratio (%)
20195,379,0002,370,0003,009,00020.43%
20185,136,7002,109,6003,027,10018.56%
20174,827,7001,789,9003,037,80012.31%
20165,122,0001,929,9003,192,10013.94%
20155,216,3002,203,7003,012,60023.92%

In the year 2019, ComfortDelGro had assets of SGD 5.4 billion. Equity remained stable at SGD 3 billion while liabilities saw a 12% increase to SGD 2.4 billion, which is due to an increase in short term borrowings, which was used to fund new acquisitions in Australia’s Public Transport Service Business. Nevertheless, the gearing ratio still remains steadily at roughly 20%. The current ratio is also steady above 1, which implies it would be highly unlikely for ComfortDelGro to run into any liquidity issues.

Operating Cash Flow & Dividends Paid Out

ComfortDelGro’s net operating cash flow has been flattish for the past few years. This is pretty much in line with their net profits which has also been flattish for the past few years. ComfortDelGro has been facing many challenges from its multiple business verticals, especially the taxi and automotive engineering services. No doubt dividends paid out has been on a slowly rising trend, indicating a higher payout ratio. But Management has been ensuring that it does not exceed the earnings per share.

Source: COMFORTDELGRO CORPORATION LTD ANNUAL REPORT

Price

ComfortDelGro’s business certainly has been impacted ever since ride-hailing services entered the market. But comparing the share price trends versus the revenue and profit trends, the share price has gyrated and overreacted at some period of times. When Uber left the Singapore market by letting Grab take over their Southeast Asian operations, ComfortDelGro’s price bounced up to a high of SGD 2.5 per share. 

The recent COVID-19 pandemic will certainly impact ComfortDelGro’s upcoming profits. But operating in countries like Singapore, China and Australia where the public are more affluent public transports users, the business would still run as normal albeit with minor impacts.

MyKayaPlus Verdict

It is not very often to come across a company that has a strong grip on the whole transport spectrum business. No doubt there are still competitors within each business verticals that ComfortDelGro is operating in. 

But competition is not new. Being one of the stronger players, be it in rail services, public buses or even taxis, ComfortDelGro has proven it is possible to grow its top line and stay competitive even under pressures from all fronts. 

With Singapore continuing to be relatively strict in dishing out private car Certificate of Entitlement (COE), more and more people will rely on the convenient and cheap public transports to get around in Singapore. So it would be a long term play should you ever decide to invest in ComfortDelGro.

Would you invest in ComfortDelGro? Let us know in the comments below!

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DISCLAIMER
The information available in this article/report/analysis is for sharing and education purposes only. This is neither a recommendation to purchase or sell any of the shares, securities or other instruments mentioned; nor can it be treated as professional advice to buy, sell or take a position in any shares, securities or other instruments. If you need specific investment advice, please consult the relevant professional investment advice and/or for study or research only.
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