The Smart Investor
    Facebook Instagram
    Thursday, March 23
    Facebook Instagram LinkedIn
    The Smart Investor
    • Home
    • About
      • About Us
      • Careers
    • Smart Investing
      • Getting Started
      • Investing Strategy
      • Smart Analysis
      • Smart Reads
    • Special Free Reports!
    • As Featured on BT
    • Our Services
      • Our Services
      • Subscribe now!
    • Login
    • Cart
    The Smart Investor
    Home»Blue Chips»4 Insights from ComfortDelGro’s Latest Business Update
    Blue Chips

    4 Insights from ComfortDelGro’s Latest Business Update

    Royston YangBy Royston YangMay 26, 2020Updated:July 13, 20204 Mins Read
    Facebook Twitter LinkedIn Email WhatsApp
    Comfort Taxi
    Share
    Facebook Twitter LinkedIn Email WhatsApp

    Last week, ComfortDelGro Corporation Ltd (SGX: C52), or CDG, released a business update.

    Within it was a description of the group’s business performance for the first quarter of the fiscal year 2020 (1Q 2020), as well as how the group is coping with the COVID-19 pandemic.

    As a recap, CDG is one of the largest land transport companies in the world with a total fleet size of around 41,600 buses, taxis and rental vehicles.

    The group is present in Singapore, Australia, China, the United Kingdom, Ireland, Vietnam and Malaysia.

    Here are four insights from the land transport conglomerate’s latest business update.

    Public transport services badly affected

    Public transport services have been designated as “essential services” in Singapore and other countries.

    The good news is that CDG has been allowed to continue operations with minimal disruptions.

    However, lockdowns and social distancing measures have significantly reduced ridership and mileage.

    In Singapore, public bus and rail ridership has plunged to around 25% to 30% of their pre-pandemic levels.

    For the UK, public bus frequency has been reduced to weekend levels, while for Australia, some service changes have been implemented.

    The result of the above is that revenue will almost surely take a steep dive while operating costs still need to be incurred.

    Without a decent level of ridership, it will be tough for this division to perform as it did before COVID-19 hit our shores.

    Net profit took a sharp dive

    For 1Q 2020, CDG’s revenue dipped by 9% year on year to S$862.4 million.

    The decline was mainly due to a decrease in revenue from its two main divisions — taxi and public transport services.

    For taxi division, COVID-19 relief schemes announced by CDG have been extended until September this year and will be reviewed further depending on how the pandemic evolves.

    In response to COVID-19 lockdowns, China taxi rentals have been almost fully waived.

    Operating profit for the group dived by 48% year on year to S$55.9 million, while net profit shrank by almost 49% year on year to S$36 million.

    Singapore still makes up the bulk of the business

    Though CDG has been actively expanding overseas through acquisitions in 2018 and 2019, the bulk of the group’s business is still Singapore-based.

    In terms of revenue contribution, Singapore made up 59% of total group revenue for 1Q 2020, down slightly from 59.2% back in 1Q 2019.

    For operating profit contribution, Singapore took up the lion’s share at 75%, up from 67.5% in the same quarter last year.

    The reason for this increase in market share is due to COVID-19 eroding CDG’s profitability in China.

    Bad weather and the pandemic’s impact on tourism also significantly lowered operating profit contribution from the UK.

    Operating margin declines across core divisions

    CDG disclosed its operating margins by division for the current quarter, and the results aren’t pretty.

    Its two core divisions, public transport services and taxi, both witnessed declines in operating margins.

    For public transport services, the operating margin fell from 8% in 1Q 2019 to 5.1% in 1Q 2020.

    Revenue only fell by 4.2% year on year for its public transport division, but due to a relatively high base of fixed costs resulted in operating profit plunging by 38.8% over the same period.

    For taxi division, revenue fell by 25.7% year on year due to lower ridership, but operating profit plummeted 91.5% year on year to just S$2.4 million as CDG doled out support measures as part of its COVID-19 relief scheme.

    Operating margin thus plunged from 16.4% to just 1.9%.

    Get Smart: The worst is yet to come

    Investors should brace themselves for a much harsher quarter as the second quarter saw lockdowns and border closures in most countries around the world.

    Though China has eased up on its lockdown during this period, it does not contribute a significant portion to both revenue and operating profit for the group.

    There may be much more pain to come, as CDG also warned that its taxi division will suffer a full-year loss, the first time in the history of the group.

    With share prices battered to multi-year lows, many attractive investment opportunities have emerged. In a special FREE report, we show you 3 stocks that we think will be suitable for our portfolio. Simply click here to scoop up your FREE copy… before the next stock market rally.

    Click here to like and follow us on Facebook and here for our Telegram group.

    Disclaimer: Royston Yang does not own shares in any of the companies mentioned.

    Yahoo
    Share. Facebook Twitter LinkedIn Email WhatsApp

    Related Posts

    Aircraft Engine on Runway

    Can ST Engineering’s Dividend Increase After Clinching a S$430-Million Contract?

    March 22, 2023
    Forklift in Warehouse

    5 Singapore REITs That May Comfortably Weather Higher Interest Rates in 2023

    March 22, 2023
    Person Putting on Rubber Gloves

    Top Glove Surged 21.4% in the Past Week: Are the Glovemaker’s Troubles Over?

    March 21, 2023
    Facebook Instagram LinkedIn Telegram
    • Careers
    • Disclaimer & Privacy Policy
    • Subscription Terms of Service
    © 2023 The Smart Investor. All Rights Reserved. The Smart Investor, thesmartinvestor.com.sg, an investment education website managed by The Investing Hustle Pte Ltd (Company Reg No. 201933459Z) is not licensed or otherwise regulated by the Monetary Authority of Singapore, and in particular, is not licensed or regulated to carry on business in providing any financial advisory service. Accordingly, any information provided on this site is meant purely for informational and investor educational purposes and should not be relied upon as financial advice. No information is presented with the intention to induce any reader to buy, sell, or hold a particular investment product or class of investment products. Rather, the information is presented for the purpose and intentions of educating readers on matters relating to financial literacy and investor education. Accordingly, any statement of opinion on this site is wholly generic and not tailored to take into account the personal needs and unique circumstances of any reader. The Smart Investor does not recommend any particular course of action in relation to any investment product or class of investment products. Readers are encouraged to exercise their own judgment and have regard to their own personal needs and circumstances before making any investment decision, and not rely on any statement of opinion that may be found on this site.

    Type above and press Enter to search. Press Esc to cancel.