Is Comfort Delgro Still A Good Investment? - FY17 Full Year Financial Results and Thoughts

Comfort Delgro recently just released their FY2017  full year financial results. Previously, I did an estimation on how its results will look like in this post. The good news is the results came in better than what I had expected.

Actual results vs what I estimated

In my previous post, I painted a very bleak picture of its business especially its taxi business. I estimated that the revenue of the taxi business will be at $1270.8 Million. Indeed, the taxi business continued to suffer and came in lower than what I had expected at $1208.7 Million.

This was offset by the rise in its public transport business which is the core of Comfort Delgro's business. I estimated the revenue of its public transport business to come in at $2302.2 Million but this came in much higher at $2392.8 Million. This came in higher due to the bus contracting model and also higher revenue for its rail business when DTL-3 started in Oct 2017.

In summary, full year operating profit came in at $409.2 Million, higher than my initial estimate of $379.4 Million. Actual EPS for FY 2017 is 13.95 cents, higher than my estimate of 11.40 cents. With this, the PE ratio is about 14x at current price of $2.05 which is better than what I estimated the PE to be 17.37x at $1.98.

Moving Forward plans of Comfort Delgro

I can sense the management of Comfort Delgro trying as much as they can to get other sources of income and also prevent its taxi business from getting worse. They have formed an alliance with Uber where all Comfort Delgro taxis are under the Uber app now. It is unknown whether this will stop its current taxi drivers from going over to the competitors but seems like it is getting stable as of now. This deal is still pending regulatory approval in Singapore.

Elsewhere in the world, they have made the following merger and acquisition:

1. Acquired remaining 49% of shares in ComfortDelGro Corporation Australia Pty Ltd
2. Acquired remaining 49% of shares in CityFleet Networks Limited in United Kingdom
3. Acquired business assets of Metro Taxi with a fleet of 170 taxis in Perth, Australia
4. Acquisition of 217 Taxi Licences and Vehicles in Shenyang, China
5. Acquisition of 100% of shares in New Adventure Travel Group with a fleet of 117 buses and coaches in Wales, United Kingdom
6. Acquired remaining 51% shares in ComfortDelGro Insurance Brokers in Singapore

Despite all the acquisitions, its financial position is still stable with gearing of 10.6% and cash of $596.2 Million. At current price of $2.05, the valuation is actually quite decent if we expect its business to remain constant. Hopefully, the acquisitions is favourable for the company and they are able to generate more profits from all these. If that happens, then really the stock price of Comfort Delgro will go up. 

If business gets worse, then all these might change and stock price can go south again. I am of the opinion that the worse is over for Comfort Delgro at least in the near term. There is still a lot of monitoring to do for this stock and it is still a high risk one. As of now, I am still vested in this stock and will continue to monitor the developments.  

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