Maybank Securities analyst Eric Ong has upgraded his call on ComfortDelGro (CDG) to “buy” from “hold” after the transport operator’s 4QFY2024 patmi of $57.1 million met his expectations as well as that of the consensus. The final quarter’s patmi represented an increase of 15.8% y-o-y, bringing CDG’s FY2024 patmi to $210.5 million, up 16.6% y-o-y.
FY2024 revenue, which grew by 15.4% y-o-y to $4.48 billion, was supported by higher ride-hailing commission rates and fares in Singapore and contributions from new acquisitions made during the year.
Ong, who has also increased his target price to $1.64 from $1.60 previously, said his upgrade comes after CDG’s share price has “retracted to an attractive level”. His new target price represents an upside of 16% to CDG’s share price of $1.41 as at Ong’s report dated Feb 28.
In its latest set of results, CDG declared a final dividend per share (DPS) of 4.25 cents, bringing its total DPS to 7.77 cents for FY2024. The DPS, came as a “pleasant surprise” to Ong, represents a high payout ratio of 80% and a “decent” yield of 5.5%.
In his Feb 28 report, Ong notes the q-o-q improvement in public transport margins while he, too, expects competition in Singapore’s taxi and private hire space to continue.
He adds that CDG’s promotional fixed commission of 70 cents per trip under the group’s mobile app, Zig, resulted in improved drivers’ availability and supply of rides, he believes competition is likely to “intensify further” with the entry of the two new ride-hailing players. Zig’s promotion ran from December 2024 to February this year.
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On the fraud allegations surrounding CDG’s newly-acquired business, A2B Australia, the group’s management rebutted the accusations, noting that A2B had already implemented measures to prevent any instances of fraud since CDG acquired in April 2024.
“This includes two-factor authentication on Cabcharge cards and the introduction of technology that eliminates manual fare pricing, requiring all payments to go through the taxi meter,” Ong writes. “For now, CDG reckons that there are no direct near-term impacts of the allegation but it will obviously monitor if demand is affected.” The analyst has kept his FY2025 - FY2027 forecasts for now.
Citi Research analyst Kaseedit Choonnawat is also keeping his FY2025 estimates after CDG’s FY2024 core profits of $207 million made up 97% of his full-year estimates.
“Public transport and taxi/private-hires, accounting for 82% of CDG's 4QFY2024 ebit combined, were the key drivers,” he writes. Choonnawat’s estimates for the current year stands 2% above the Street’s.
In his view, CDG’s rail fares should increase by 6% in FY2025 according to the Public Transport Council although rail ridership appears to be normalising.
He also notes that margin improvements for its London bus business should continue, while the revenue impact from the handing of its Jurong bus package in Singapore from September 2024 is “known”.
The Citi analyst has kept his “buy” call on CDG with an unchanged target price of $1.68 for the time being.
OCBC Investment Research analyst Ada Lim has also kept her “buy” call on CDG with an unchanged target price of $1.67.
Like the rest of the analysts here, CDG’s FY2024 results met Lim’s expectations with revenue and net profit coming in 0.1% and 1.2% above her forecasts.
In FY2025, Lim sees bright spots for CDG’s public transport business while CDG should look out for the “new kids on the block” in Singapore’s ride hailing sector. Despite the potential disruption, the taxi and private hire segment should still see y-o-y growth with a full year’s worth of revenue contribution from London private hire car and courier company, Addison Lee.
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The rest of the segments are expected to remain stable, Lim notes.
In her report dated Feb 28, Lim says she has “finetuned” her forecasts as well as tweaked her cost of equity assumption to 9% from 8.8% from a higher equity risk premium input. The higher equity risk input takes into account a shift in both revenue and operating profit contribution from overseas markets and ongoing allegations of taxi fraud by A2B.
“We note that CDG has moved from a net cash to a net debt position as at Dec 31, 2024, as a result of debt taken up to fund acquisitions. While its net gearing of 6.7% remains manageable, in our view, we expect the company to go through a period of consolidation to realise synergies, rather than continue to aggressively pursue merger and acquisition (M&A) opportunities,” she says.
Shares in CDG closed 2 cents lower or 1.42% down at $1.39 on Feb 28.
