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ComfortDelGro: Will Slow And Steady Win The Race?
Tradeable, Tradeable Ideas | 21 May 2014
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By: Raymond Leung
Articles (142) Profile
  1. ComfortDelGro (CDG) released slightly improved financial results for 1Q14. Revenue grew 9.2 percent while profits saw an roughly similar increase of 9.7 percent.
  2. This was largely due to increased contributions from its overseas operations as local operations continue to face margin pressures from labour and other operational costs.
  3. Expectations are rife that CDG will continue its acquisition spree overseas mainly due to its substantial cash hoard.

Analyst updates of ComfortDelGro

ComfortDelGro (CDG) released its 1Q14 results which were slightly higher in comparison with the similar quarter a year ago.

Historical performance shows that CDG’s growth is slow and steady. There was no exception for the current quarter.

Revenue for the quarter grew 9.2 percent to $950.8 million from 1Q13’s $870.8 million. The growth in revenue was attributed to broad-based growth through its diversified business and a positive effect from foreign currency translations.

CDG saw a 9.7 percent increase in net profit to $63.3 million for the quarter. The group’s overseas business was one of the main contributors to the profit despite losses due to start-up costs of the upcoming Downtown Line.

Currently, CDG’s overseas operations accounts for 50.8 percent of the group’s total operating profit.

It is expected for the group to continue its acquisition spree overseas. This assumption is by and large due to its substantial cash hoard. In the last financial year, the group acquired a London bus company, Metroline West and an Australian bus company, Eastrans.

In the current year, we expect CDG’s overseas businesses will continue to be a strong contributor. Local businesses are expected to face further margin pressure as labour and other operation costs (petrol & maintenance etc.) rises.

Should there be any upside, it will likely come from its overseas businesses or possible acquisitions.

Analysts from OCBC Research expect CDG to continue its growth at a slower pace in the coming quarter. With this in view, they reiterated the group’s “Buy” call at a target price of $2.30.

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Trained in fund management, Raymond is familiar with shares and various investment vehicles.

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ComfortDelGro Corp  2.460 -0.02 -0.81%   
Business: [FY18 Turnover] Public transport services (71.2%), taxi (19.1%), others (9.7%).

Insight: May-19, 1Q19 revenue rose 7.8% to $947.3m, underpi... Read More

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