ComfortDelgro – Phillip
A resilient stock for uncertain times
ComfortDelGro Corporation (CDG) is a land transport conglomerate with businesses across various business segments and geography. The bus and taxi businesses are the largest profit contributors for the Group.
• Net income increased 6.8%y-y
• Rail profitability declined in preparation for DTL
• Australia’s bus business the best performer
• Maintain Buy with unchanged TP of S$1.65
What is the news?
CDG reported a strong 6.8% growth in net profit for the quarter due to strong underlying business growth with relatively unchanged margins. Profit contributions increased across all business segments, except for the Rail & Driving centre business. Despite revenue growth of 13% for the Rail business, profitability declined as the company ramped up its headcount in preparation for DTL.
How do we view this?
The results were in line with our expectations. Most business units performed well with healthy margins and revenue growth. However, contributions from CDG’s China bus business disappointed and reported a second consecutive quarter of loss due to lower mileage operated. Among the more significant profit contributors, Australia’s bus business performed the best with an estimated 18.5% increase in profits in local currency terms.
CDG remains our preferred stock in the Land Transport sector. The Group’s overseas diversification shields them from the near term headwinds facing Singapore’s Land Transport sector. Maintain Buy.