Do ComfortDelGro's (SGX:C52) Earnings Warrant Your Attention?

ComfortDelGro Corporation Limited (SGX:C52) is a leading land transport conglomerate operating in Singapore, Australia, the UK/Ireland, and China. With a market capitalization of S$2.25 billion and an enterprise value of S$2.55 billion, the company has been making waves in the transportation industry. But the question remains: do ComfortDelGro's earnings warrant your attention?



ComfortDelGro's earnings per share (EPS) for the last 12 months were 0.07, which is lower than some of its peers in the transportation sector. However, its EPS growth rate of 11.72% per year is higher than the industry average. This indicates that ComfortDelGro's earnings are growing at a faster pace than its competitors, despite having lower absolute values.



The company's earnings are driven by several key factors, including its public transport, taxi and private hire, and other segments. Here are the main drivers and their sustainability:

1. Public Transport Segment:
- *Key Driver:* Revenue and operating profit from public transport services, which contribute significantly to ComfortDelGro's overall earnings.
- *Sustainability:* The public transport segment is relatively stable and sustainable in the long term, as it caters to the daily commuting needs of a large population. However, it may face challenges from changes in consumer behavior, technological advancements, and competition from other mobility options.
- *Example:* In 3Q24, the Public Transport segment saw a 5.2% and 20.5% q-o-q increase in revenue and operating profit, respectively, mainly due to public bus contract renewals in the UK (OCBC Investment Research, 2024-11-15).

2. Taxi and Private Hire Segment:
- *Key Driver:* Operating profit from the taxi and private hire segment, which accounts for a significant portion of ComfortDelGro's earnings.
- *Sustainability:* The taxi and private hire segment faces more uncertainty due to the rise of ride-hailing services and changing consumer preferences. However, ComfortDelGro's strong brand recognition and strategic initiatives, such as expanding premium transportation services, can help sustain this segment's earnings in the long term.
- *Example:* Despite a 9.9% q-o-q decrease in operating profit in 3Q24, the segment's operating profit margin remained comparable to the previous year (OCBC Investment Research, 2024-11-15).

3. Expansion into New Markets and Segments:
- *Key Driver:* Earnings growth from expanding into new markets and segments, such as China, Australia, and the UK/Ireland.
- *Sustainability:* ComfortDelGro's expansion into new markets and segments can provide long-term growth opportunities, but it also exposes the company to additional risks and uncertainties. Successful integration and adaptation to local market conditions are crucial for the sustainability of these drivers.
- *Example:* ComfortDelGro's expansion into China has contributed to its earnings growth, with China accounting for 7% of its EBIT in 2023 (ComfortDelGro Annual Report, 2023).

4. Strategic Partnerships and Acquisitions:
- *Key Driver:* Earnings growth from strategic partnerships and acquisitions, such as the partnership with Zurich Insurance for travel insurance products and the acquisition of taxi and private hire businesses.
- *Sustainability:* Strategic partnerships and acquisitions can provide short-term earnings boosts, but their long-term sustainability depends on the successful integration of new businesses and the realization of synergies. ComfortDelGro's ability to identify and capitalize on strategic opportunities will determine the sustainability of this driver.
- *Example:* ComfortDelGro's partnership with Zurich Insurance has expanded its product offerings and customer base, contributing to its earnings growth (SGinvestors.io, 2025-01-10).

In conclusion, ComfortDelGro's earnings are driven by a combination of stable and sustainable factors, as well as more uncertain and volatile elements. The company's ability to adapt to changing market conditions, innovate, and execute strategic initiatives will determine the long-term sustainability of its earnings drivers. While ComfortDelGro's earnings may not be as high as some of its peers, its strong growth prospects and strategic initiatives make it an attractive investment opportunity for those seeking exposure to the transportation sector.