ComfortDelGro Corporation (SGX: C52), or CDG, has enjoyed a reprieve of sorts.
After touching a 52-week low of S$1.01 back in June 2023, the land transport giant’s share price rebounded by 35.6% to close at S$1.37.
The shares are also up 16% in the past year as investors feel more optimistic about CDG’s business.
The group has pulled off a series of acquisitions in the past 18 months.
Can CDG’s share price continue to rise in the coming months? Let’s find out.
A strong set of earnings
CDG recently released an encouraging set of results for 2023.
Revenue inched up 2.6% year on year to S$3.9 billion with operating profit creeping up 0.8% year on year to S$272.1 million.
Net profit improved by 4.3% year on year to S$180.5 million.
However, 2022’s net profit included a one-off S$30.5 million gain on the disposal of Alperton property in London.
Excluding this item, core net profit would have climbed 26.6% year on year.
The business also generated a positive free cash flow of S$70.6 million for 2023, down from the S$297.9 million churned out in 2022.
A final dividend of S$0.0376 was declared, bringing 2023’s dividend to S$0.0666, 44% higher than the total ordinary dividend of S$0.0461 paid out a year ago.
2022 also saw the payment of a special dividend of S$0.0387 in addition to the ordinary dividend.
These good results should lift investors’ sentiment surrounding the stock and income investors should be pleased with a higher ordinary dividend.
Acquisitions to boost its capabilities
CDG has also undertaken a string of acquisitions since July 2022 to expand its reach and capabilities.
Back in July 2022, it acquired Irish coach operator GoBus for €12 million, elevating itself to become the third-largest inter-city coach operator in the country.
March 2023 saw two acquisitions by the land transport giant.
The first was for Vedamain, a private hire business under the KingKabs brand, for around S$11.8 million.
The second was the purchase of the remaining 10% stake in Ming Chuan Transportation Pte Ltd for around S$1 million, making the aged transportation business a wholly-owned subsidiary.
December 2023 saw a continuation of CDG’s acquisition activity.
That month, it made an offer for all the shares of A2B Australia, a leading personal transportation provider with more than 8,000 vehicles in its network.
The total consideration was A$182 million and is in line with CDG’s aim to scale its point-to-point mobility business to enable the group’s Australian division to become a multi-modal mobility player.
And just last month, CDG’s wholly-owned subsidiary CityFleet Networks acquired CMAC Group in the UK for around S$135.4 million.
CMAC is a ground transport management and accommodation network specialist.
These acquisitions will require a gestation period for the group to integrate their operations before seeing contributions.
But these are promising moves made by management to grow CDG’s network and extend its capabilities and presence.
Joint ventures to grow its footprint
In addition to acquisitions, CDG has also inked several partnerships and joint ventures.
In July 2023, CDG was awarded a contract to operate rail services in Paris, France’s capital city.
This contract was secured in partnership with RATP Dev and Alstom, two French companies, and is part of an international consortium.
The contract is for an initial term of six years which will commence by the end of 2025.
January 2024 saw a joint venture between CDG and the Go-Ahead group to secure a contract to operate and maintain the Stockholm Metro in Sweden.
This contract marks the group’s maiden contract in Sweden and will commence in May 2025 for a term of 11 years.
CDG will hold a 45% stake in this joint venture and this win will increase the total length of track operated by the group to over 310 km.
It also extends CDG’s presence into Sweden after winning rail contracts in France (2022) and New Zealand (2021).
A sanguine outlook
CDG has posted a sanguine business outlook in the face of challenges such as high interest rates and inflation.
Singapore rail revenues are projected to increase with better ridership and fare increases.
Singapore bus revenue, however, is expected to decline from September 2024.
The taxi and private hire division in Singapore should see higher revenue from the introduction of Zig platform fees in July 2023, while taxi revenues in China should recover with the relaxation of COVID-19 restrictions.
Get Smart: Expanding its global reach
CDG has posted a resilient set of earnings amid macroeconomic headwinds.
Its savvy list of acquisitions should help to boost revenue and earnings this year as the purchases start to contribute to the group.
Meanwhile, CDG’s joint ventures should start contributing to its top and bottom lines from 2025 onwards.
Investors can look forward to better financial numbers ahead while keeping a watchful eye on the land transport giant’s debt level and interest payments.
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Disclosure: Royston Yang does not own shares in any of the companies mentioned.
