Core profits rose by 29% y-o-y to $51.6 million, coming at 22% of the consensus’ FY2025 estimates.
To Citi Research analyst Kaseedit Choonnawat, CDG’s core profits was deemed to be in line with his estimates as the first quarter is a seasonally low one for the group. ComfortDelGro’s public transport and taxi and private-hire businesses were the key drivers, accounting for 85% of CDG’s total ebit.
Choonnawat, who kept his “buy” call and target price of $1.84, believes CDG’s earnings will improve sequentially into the “summer peak” supported by higher margins from the contract renewals at improved margins for its UK public transport segment.
Maybank Securities analyst Eric Ong also noted CDG’s “seasonal slow start”, with CDG’s core patmi of $51.2 million coming in at 22% of Maybank’s full-year forecasts.
See also: New customer orders for UMS warms analysts’ sentiments
“While operating profit across segments in Singapore improved due to costs control and internal efficiency gains, net profit was dragged by higher net interest expense arising from increased borrowings to finance acquisitions overseas last year,” Ong observes.
Even though CDG’s taxi and private-hire revenue and ebit surged by 74% and 51% y-o-y to $258 million and $35 million respectively, ebit margin narrowed by 2.1 percentage points y-o-y to 13.6% partly due to seasonality and increasing market competition, the analyst notes, adding that CDG’s taxi fleet size has also been shrinking “over the years” to less than 8,200.
Like Citi’s Choonnawat, Maybank’s Ong expects CDG’s earnings to improve sequentially. As such, he has left his forecasts for FY2025 to FY2027 intact for now. The analyst has retained his “buy” call due to CDG’s share price weakness. He has also kept his target price at $1.64.
See also: CGS International holds 'add' call on Marco Polo Marine with reduced target price
PhillipCapital analyst Paul Chew has also maintained his “buy” call as he sees CDG delivering more “stable and visible” growth from acquisitions, as well as the new and repricing of its bus contracts in the UK. The group’s dividend yield of 6% is also seen to be attractive as CDG maintains its payout ratio of 80%.
From CDG’s 1QFY2025 results, which were within Chew’s expectations, the analyst liked the group’s “stellar turnaround” in the UK, where operating profits spiked from $0.9 million to $7.9 million.
“Excluding acquisitions, operating earnings rose 27.5% y-o-y, due to a significant turnaround in the UK. Operating earnings spiked from $0.9 million to $8 million with the renewal of London bus routes and the contribution from the new Metroline Manchester contract,” Chew writes.
That said, he is less certain over CDG’s high capital expenditure (capex) due to its need to buy new buses also in the UK.
“Capex jumped from $68 million to $306 million in 1QFY2025. Almost 60% of the capex is on 452 buses from the Metroline Manchester contract,” Chew adds. “The UK is also converting more buses to electric vehicles (EVs).”
Chew, who seems to be the most optimistic on CDG, says the outlook for growth remains “robust” in FY2025 with the two key earnings drivers being the UK buses and the full-year contribution of earnings from Addison Lee.
In Singapore, CDG’s earnings will depend on the competitive intensity of ride-hailing operations with lower costs in rail, especially electricity costs supporting margin expansion. The analyst has kept his target price at $1.68.
For more stories about where money flows, click here for Capital Section
CGS International analyst Jacquelyn Yow has kept her “add” call on CDG as she sees the group’s acquisitions “bearing fruit”.
CDG’s core net profit rose by 19% y-o-y thanks to higher contributions from its UK business and the newly-acquired CMAC Group, although, Yow notes, the figure stood at 20% of CGSI’s FY2025 estimates due to a higher effective tax rate from increased overseas contributions and purchase price allocation (PPA) amortisation from recent acquisitions.
Looking ahead, the analyst believes there’s “more to come” from CDG’s UK operations with better margins from CDG’s UK business from higher traffic volumes during the summer season. Additional Metroline contract renewals are also expected to happen with improved margins in the rest of FY2025. CMAC’s Suntransfers securing an exclusive contract with On The Beach, one of the UK’s largest online holiday providers with a customer base of around 2 million passengers annually, will also provide an additional boost to the segment.
CDG’s recently acquired entities are also tipped to remain “key growth drivers” supported by a seasonally stronger ridership in the 2Q to the 3Q as well as a ramp-up in overseas bus contributions at improved margins.
However, the analyst has lowered her core net profit forecasts by 6% for FY2025 to FY2027 due to the PPA amortisation and higher effective tax rate.
Accordingly, Yow’s target price has been lowered to $1.70 from $1.80 based on an FY2026 P/E of 16 times or 0.5 standard deviations (s.d.) above CDG’s five-year average.
Shares in CDG closed 1 cent higher or 0.67% up at $1.50 on May 16.
