ComfortDelGro Corporation Ltd: Higher dividends save the day 1H26 earnings fell 20% y/y due to challenged Taxi & Private Hire environment, partially offset by Maintain FY26F earnings and lift FY27F earnings by 5% to reflect faster recovery at Addison Lee and continued UK public transport momentum
- 1H26 earnings fell 20% y/y due to challenged Taxi & Private Hire environment, partially offset by
- Maintain FY26F earnings and lift FY27F earnings by 5% to reflect faster recovery at Addison Lee and continued UK public transport momentum
- Lift FY26F DPU to 7.87Scts from 7.43Scts with higher 90% payout ratio
- Maintain HOLD with higher TP of SGD1.40 (vs SGD1.30)
Results Overview
2Q26 revenue grew 6% y/y, driven by Public Transport. ComfortDelGro (CDG) reported 2Q26 revenue of SGD1,334mn, up 6% y/y. Growth was largely driven by the Public Transport segment, which expanded 12% y/y, supported by new Victoria contracts in Australia, fare indexation on existing contracts, and the renewal of UK contracts at higher margins.
2Q26 earnings declined 23% y/y, weighed down by Taxi & Private Hire. CDG reported 2Q26 earnings of SGD45mn, down 23% y/y. The decline was primarily attributable to a 48% y/y drop in earnings from the Taxi & Private Hire segment, driven by: (1) weakness in Addison Lee’s B2B business amid disruptions related to the Middle East conflict, (2) continued fleet attrition in Singapore, and (3) competitive pressures alongside softer demand in Australia.
Declared unchanged interim dividend of 3.91 Scts. CDG maintained its interim dividend at 3.91 Scts, implying a payout ratio of 99%.
Key Briefing Takeaways
Higher 1H payout reflects dividend rebalancing, while shareholder returns remain a priority. Management indicated that a full-year payout ratio of 100% is unlikely to be sustained in FY26. Instead, the elevated 1H26 payout was intended to better balance dividends between the two halves of the year, given the group's typically stronger 2H earnings profile. Nonetheless, management reiterated its commitment to rewarding shareholders over the long term.
UK Public Transport still offers meaningful margin expansion potential. Management continues to secure double-digit margins on new London contract renewals. It highlighted that the pool of bidders remains limited, as operators require nearby depots to submit competitive bids. In addition, industry participants are pricing in higher risk due to the one-year indexation lag embedded in London contracts. With around one-third of CDG's UK contracts yet to be renewed, management sees a further two to three years of runway for margin expansion. Separately, the implementation of AI-driven route management has improved on-time performance, potentially unlocking an additional 1-2ppt margin uplift through performance-linked incentives.
Singapore Taxi & Private Hire remains challenging, with increasing focus on Private Hire. Management noted that Grab continues to aggressively recruit taxi drivers, while the industry's driver pool continues to shrink amid the perceived stigma associated with the profession. Against a backdrop of strong consumer preference for private hire vehicles, driven by greater flexibility and the high cost of vehicle ownership due to elevated COE prices, CDG has accelerated the expansion of its private hire fleet, which increased to 700 vehicles from 600 at end-2025.
Australia Taxi & Private Hire remains under pressure, though early signs of stabilisation are emerging. Management highlighted intensifying competition from Uber, which has taken market share from incumbent operators. In response, CDG is repositioning more of its fleet towards the premium Silver Service offering from the mainstream 13cabs platform to create a more differentiated proposition. The company also acknowledged that an impairment on A2B remains possible should operating performance continue to disappoint following the acquisition.
UK Taxi & Private Hire is recovering steadily. Management highlighted that Addison Lee's volumes were significantly impacted in March after a major Middle Eastern airline client, accounting for approximately 15-20% of volumes, suspended flights amid regional disruptions. Volumes recovered to roughly 40-50% of normalised levels during 2Q26 and have since improved further to around 65%. Management remains cautiously optimistic that volumes could normalise by year-end.
Autonomous vehicles remain at an early stage, with meaningful earnings contribution still years away. Management expects to commence small-scale commercial autonomous vehicle operations in China by year-end. While it sees a stronger economic case for autonomous mobility solutions in higher labour-cost markets such as the UK, Australia and Singapore, regulatory hurdles remain a key challenge. Management also remains mindful of capital allocation, preferring not to invest aggressively too early as autonomous hardware costs continue to decline.
Our views
Maintain FY26F earnings and lift FY27F earnings by 5% to reflect faster recovery at Addison Lee and continued UK public transport momentum. Management highlighted that the Taxi & Private Hire operations have somewhat stablised with Addison Lee recovering along with passenger volume at its Middle East airline client. Nonetheless, on y/y basis, it will likely be down. In addition, there is an absence of a major one-off SGD18.5mn from gain on disposal of Victoria bus depot, which could be partially offset by continued margin expansion at UK bus. Accordingly, we maintained our below consensus earnings for FY26F, but see potential for return to growth in FY27F with early signs of its Taxi & Private Hire operations stablising.
Dividend payout focus for this year. We believe this year’s earnings will be a wash for the company given the twin headwinds of Iran war and competitive pressure in its Taxi & Private Hire segment. With a 100% payout ratio in 1H26, we believe the company has demonstrated its focus on shareholder returns. While management has indicated that 100% payout for FY26 is unlikely, we believe they are likely more open to limit the decline in dividend payout and that it could payout closer to 90% to keep yield around 6% level.
Maintain HOLD with a higher TP of SGD1.40 (vs SGD1.30). We applied higher 5.3x fwd EV/EBITDA multiple, +1SD above its 5-year average, on rolled forward FY27F EBITDA. We believe the higher premium is justified by potentially resilient dividend payout at 7.87Scts for FY26F and FY27F, representing attractive ~6% yield.
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