ComfortDelGro Corporation Ltd: Facing structural domestic challenges
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- Downgrade to HOLD and TP of SGD1.60 (versus SGD1.80) pegged to 5.3x fwd EV/EBITDA on lowered FY27F EBITDA
- FY25 earnings at SGD230mn (+9% y/y) in line with estimates largely attributable to one-off SGD19mn disposal gain from Victoria bus depots
- Trim FY26F/27F earnings by 11%/9% to adjust for one-off disposal gains in FY25 and ongoing headwinds in the Singapore operations
- Expect modest 7% earnings growth in FY26F driven by UK public transport, AUD/SGD FX tailwinds and lower finance cost
Results overview
FY25 earnings rose 9% y/y to SGD230mn, in line with both our estimates and consensus. The result largely met expectations on the back of a one-off SGD19mn disposal gain from the Victoria bus depot. Adjusting for the net-of-tax one-off A2B dividend income in FY24 (SGD6.1mn) and the Victoria bus depot disposal gains in FY25 (SGD18.5mn), we estimate normalised earnings grew 5% y/y. Growth was driven by the full-year contribution from Addison Lee, improved UK bus profitability, and an OBU installation windfall in the inspection and testing business, partly offset by weaker profitability in Singapore public transport and taxi operations.
Declared final dividend of 4.59Scts. Together with its maintained 80% payout ratio, this brings total FY25 dividends to 8.5 Scts, in line with our estimates.
We attended ComfortDelGro’s analyst briefing on the evening of 27 Feb and summarised our takeaways as follows:
Public Transport
Singapore
Declining profitability from loss of Jurong West bus package with further declines expected with loss of Tampines bus package. For FY25, operating profit fell 7% y/y, driven by the annualised impact of loss of Jurong West package (from Sep 24) and higher rail charges, partly offset by lower fuel and electricity costs. Looking into 2026–2027, we expect earnings to soften further as the Tampines package (from Jul 26) rolls off, although this should be partially cushioned by improved rail profitability from fare increases.
UK
Profitability momentum remains strong, supported by re-contracting at higher margins and contributions from the Manchester contract. We estimate operating profit surged by more than 80% y/y on the back of these wins and renewals at double-digit margins. Management indicated there is still room for margin expansion, with recent contracts being secured at double-digit margins and plans to exit unprofitable contracts early. We therefore expect margins to continue trending up toward high single digits over the next 1–2 years.
AU
Easing bus driver shortage, full year Victoria bus contribution and favourable FX to drive strong growth in FY26. We estimate that operating profits have remained relatively flat y/y due to driver shortage issues earlier in the year. While new Victoria bus contracts were secured (commencing Jul 2025), they came with lower margins. The segment also faced an estimated 3% AUD/SGD FX headwind. Into FY26, with AUD averaging more than 5% higher at the start of the year versus the FY25 average and easing driver shortages, we expect a low-teens uplift in profitability.
Taxi & Private Hire
Singapore
Structural taxi fleet decline and intense competition continue to weigh on earnings. We estimate operating profit fell about 18% y/y, driven by a 7% decline in fleet size and lower commissions following the flat SGD0.70 commission fee effective 2 Dec 2024. Fleet contraction was exacerbated by aggressive Grab promotions to attract drivers. Conversations with drivers suggest high rental costs and intense competition are accelerating early retirements, reinforcing our view that fleet decline, and profitability pressure, will persist.
Strategic pivot toward premium fleet and autonomous taxis directionally sound, but will take time. Management noted B2C remains highly competitive and is shifting toward premium B2B offerings, leveraging Addison Lee’s capabilities and adding premium Alphard vehicles. In parallel, it targets converting 10% of its fleet to autonomous taxis by 2030, aimed at complementing human drivers by serving demand pockets that are harder to cover (remote areas and late-night periods). However, this is a multi-year transition and is unlikely to provide near-term relief.
UK
Early green shoots for Addison Lee. Operations were pressured earlier in the year due to macro headwinds, with the B2C segment more exposed. Operating margin also likely diluted to an estimated mid-single digit level, partly due to around SGD10mn p.a. of PPA amortisation. That said, the recovery appears to be gaining traction, with trip volumes up 10% q/q in 4Q25. We expect mid-single digit growth in FY26 as volumes continue to normalise, with margins improving on operating leverage.
AU
Challenging competitive environment, but likely to benefit from FX tailwind. Despite additional quarter of A2B contribution, we estimate that operating profits fell sharply by 36% y/y due to competitive pressure, a mild FX headwind, and SGD3.6mn of PPA amortisation. Still, we expect the segment to return to mid-single digit growth in FY26, supported by a favourable FX backdrop and operating leverage.
Inspection & Testing
On-board unit (OBU) windfall likely to extend into 1H26 and normalise thereafter. OBU installation demand delivered a material windfall, with operating profit up 50% y/y as installation volumes surged ahead of the year-end government mandate. Management expect remnant installation demand to persist into 1H26, after which profitability should normalise.
Overall
Trim FY26F/27F earnings by 11% to adjust for one-off disposal gains in FY25 and ongoing headwinds in the Singapore operations. Although the Singapore taxi fleet showed early signs of stabilisation in 3Q25, this proved short-lived, with attrition persisting into 4Q25. Coupled with aggressive promotional activity from Grab to scale its new taxi operations, we expect ComfortDelGro’s Singapore taxi business to remain in a sustained structural decline. That said, we view management’s strategic pivot toward premium fleet and autonomous taxis as directionally sound. However, the shift is a multi-year effort and unlikely to provide any near-term relief. Nonetheless, we still expect FY26F earnings to grow by a modest 4% y/y (vs FY25 excluding major Victoria bus depot disposal gains, net of 30% tax), driven primarily by growth outside Singapore.
Softness in Singapore to be largely offset by continued momentum in UK public transport, FX tailwinds for the Australia business, and lower finance costs. In the UK, the group continues to renew contracts at double-digit margins, which should support further profitability growth in its bus operations. For Australia, the AUD has appreciated ~6% against SGD and, if sustained, should provide a meaningful translation tailwind. On financing, management has indicated it will pare down debt using cash distributions from SBS Transit, which should translate into lower net finance expenses.
Downgrade to HOLD and TP of SGD1.60 (versus SGD1.80). We derive our TP by applying a 5.3x forward EV/EBITDA multiple, which is +1 S.D. above its 5-year average, to our lower revised FY27F EBITDA estimate. We view a modest valuation premium as warranted, supported by the group’s shareholder-friendly capital return framework, anchored by an 80% payout ratio and a stable ~5% dividend yield at our TP.
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