ComfortDelGro - CGS-CIMB Research 2024-01-11: 4Q23 PATMI Likely To Double Y-o-y; UK Tailwinds Fuel Growth In FY24

• We project ComfortDelGro (SGX:C52) to record a PATMI of S$53m for 4Q23F (+6% q-o-q, +108% y-o-y), wrapping up FY23F with a commendable 33% core PATMI growth.
• We expect the q-o-q earnings growth in 4Q23F to be driven by further margin expansion of its UK public bus business, which we think can more than offset Singapore’s seasonally weaker results.

Healthy dividend yield of ~4.8%

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• See ComfortDelGro's dividend history.

UK margin expansion remains the key profit driver in FY24F

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• taxi segment growth.
• Recall ComfortDelGro’s UK operations first returned to positive EBIT of S$6.1m in 3Q23 (1H23: -S$5.8m, FY22: - S$10.4m) as annual indexation of service fees on route anniversary (~70% completed in 9M23) allowed ComfortDelGro to pass on the higher costs it had absorbed over the past year back to the UK government.
• Notably, ComfortDelGro has also achieved tender wins for bus routes in London at elevated margins, which it attributed to easing competitive pressure and operators increasingly pricing in larger cost buffers to cushion against potential shocks, given that the UK public bus service fees’ indexation mechanism has proven to be less effective during periods of elevated inflation.

Taxi segment earnings should continue to improve

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ONG Khang Chuen CFA CGS-CIMB Research | https://www.cgs-cimb.com 2024-01-11 SGinvestors.io

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