Citi Research’s Kaseedit Choonnawat says CDG’s core profits were in line with his estimates as the first quarter is a seasonally slow one for the group. He is keeping his “buy” call and target price of $1.84, as he expects earnings to improve sequentially entering the “summer peak”, thanks to UK contracts renewed at higher margins.
Eric Ong of Maybank Securities noted CDG’s “seasonal slow start”, observing that while operating profit across segments in Singapore improved due to cost control and efficiency gains, net profit was dragged down by stiffer interest costs.
CDG’s taxi and private-hire revenue and ebit surged by 74% and 51% y-o-y to $258 million and $35 million respectively, but ebit margin narrowed by 2.1 percentage points y-o-y to 13.6% partly due to seasonality and increasing market competition. Ong adds that CDG’s taxi fleet size has shrunk to less than 8,200.
Nonetheless, Ong expects earnings to improve sequentially. As such, he has left his forecasts for FY2025 to FY2027 intact, along with his “buy” call and $1.64 target price.
See also: Replay of SPH may occur with SingPost; clarity and monetisation of assets key, say analysts
PhillipCapital’s Paul Chew has also maintained his “buy” call as he sees “stable and visible” growth from acquisitions, as well as the new and repricing of its bus contracts in the UK.
Chew likes the “stellar turnaround” in the UK, where operating profits spiked from $0.9 million to $7.9 million due to the renewal of contracts at higher rates.
CDG’s dividend yield of 6%, backed by the 80% payout ratio, is also attractive. That said, he is less certain about CDG’s high capital expenditure due to its need to buy new buses in the UK.
See also: Aircraft leasing could be a steady bet amid turbulence
“Capital expenditure 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 UK buses and the full-year contribution of earnings from Addison Lee.
In Singapore, 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.
CGS International analyst Jacquelyn Yow has kept her “add” call on CDG as she sees the group’s acquisitions “bearing fruit”. She believes there is “more to come” from CDG’s UK operations, with better margins from the business due to 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 2Q to 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 Purchase Price Allocation 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 above CDG’s five-year average.
In the most recent development, CDG’s advertising arm, Moove Media, won a seven-year contract to manage advertising on all 5,800 buses and 30 interchanges. The contract, which cost CDG $150 million and will take effect on Nov 1, comes with a two-year extension. This marks the first time the rights are under one roof.
In its May 19 note, DBS Group Research suggests this deal will remove the overhang of a potential complete loss of bus ad profits but will have “minimal” net impact on CDG’s overall earnings. DBS is keeping its “buy” call and $1.80 target price.
