ComfortDelGro - Phillip Securities 2021-02-22: Back To Core Profitability


ComfortDelGro - Back To Core Profitability

  • ComfortDelGro (SGX:C52)'s 4Q20 PATMI is 40% below expectations due to lower-than-expected public transport revenue and earnings.
  • Q-o-q, 4Q20 EBIT swung from S$0.2mn loss in 3Q20 to S$29.7mn profit, excluding government relief. Taxis returned to profitability in 4Q20.
  • ComfortDelGro is emerging out of the pandemic with an even stronger balance sheet. Net cash of S$279mn was up from S$64mn in FY19.
  • Recovery is underway with economic reopening, rebound in fuel index and dialling back of taxi rebates. Maintain BUY and DCF target price of S$1.83 (WACC 7.7%).
  • Taxis to lead the rebound with lower rental relief. Public transport to lag as traffic volumes are still almost 30% below pre-pandemic levels. Our FY21e forecasts are relatively unchanged.

The Positives

Q-o-q improvement in revenue and earnings.

  • Q-o-q, ComfortDelGro's revenue increased S$69mn to S$885mn. EBIT swung back to a positive S$29.7mn from S$0.2mn losses in 3Q20, excluding government relief. The improvement came from taxi operations, which returned to a profit of S$9.7mn from 3Q20’s -S$7.2mn.

Healthy cash flows.

  • Operating cash flow in 4Q20 was S$143mn or an estimated S$100mn excluding government relief (4Q19: +S$206mn).
  • ComfortDelGro's net cash spiralled to S$279mn from S$64mn in FY19. FCF in FY20 was S$513mn, up from S$377mn in FY19.

The Negatives

Public transport still languishing.

  • Q-o-q, public transport revenue rose S$60mn to S$700.5mn, and EBIT declined from q-o-q from S$8mn to S$1.6mn, excluding government relief. Profitability was worse than other smaller divisions in the group such as engineering and inspection.
  • SBS repairs and maintenance costs rose around 10% y-o-y in 2H20. Money was spent on the refurbishment of ageing trains and the bus fleet, on top of the frequent cleaning of buses and trains.

Dividends slashed.

  • ComfortDelGro's FY20 final dividend was S$0.0143, an 85% plunge from the S$0.0979 paid in FY19. There was no interim dividend in 1H20, unlike 1H19’s S$0.045.
  • Payout ratio was 50% in FY20, down from 80% in FY19.


  • ComfortDelGro would have been in a net loss in FY20 without government relief of S$169.3mn. Nevertheless, FY21 marks a recovery year, supported by economic reopening, higher fuel indexation for buses and lower tax rebates.


  • Since the pandemic outbreak on 23 January 2020 in Singapore, Comfort’s share price is down 28%, from S$2.20 to S$1.58.
  • The path to its earnings rebound is clear. It will be led by taxis. Rental waivers Comfort dished out in 2020 amounted to S$116mn, according to our estimate. Waivers planned in 1Q21 could amount to around S$13mn. If taxi takings continue to improve, these waiver can end in 1Q21.
  • The longer-term challenge for its taxi business is a continuous decline in its fleet size. ComfortDelGro’s fleet was down 11.7% in 2020, from 10,700 to 9,444. The pivot overseas for growth should help to compensate for this.
  • Another initiative that should help is the conversion of its taxi fleet from diesel to hybrid by 2023. About 60% has been converted. Hybrid taxis require less maintenance - due to fewer moving parts - and command higher rentals as drivers benefit from higher flag-down meter rates and fuel efficiency.


  • Near term, rail operations could remain in the doldrums amid rising costs of maintaining an old fleet. The latest data from January suggests rail passenger traffic was down 29% y-o-y in the month. Continued working from home remains a major impediment to a recovery to pre-pandemic levels.


  • Australia is its largest overseas profit contributor, where we expect a recovery in 2021. ComfortDelGro has invested S$1.24bn in Australia, only slightly below Singapore’s S$1.36bn.
  • Revenue in Australia dipped only 3% in 2020 to S$608mn, as scheduled bus services were minimally disrupted. Earnings, though, halved by 54% to S$35.7mn due to soft taxi revenue, impairment charges for taxis and higher wage costs. Government relief was a minimal S$2.1mn.

Maintain BUY and target price of S$1.83

Paul Chew Phillip Securities Research | https://www.stocksbnb.com/ 2021-02-22
SGX Stock Analyst Report BUY MAINTAIN BUY 1.830 SAME 1.830