Where Will ComfortDelGro Corporation Limited Drive to Next?

Last week, I covered the business segments of global transportation stalwart ComfortDelGro Corporation Limited (SGX: C52).  This week, I would like to look at the geographical revenue spread of the company.

As a recap, from 1 January 2009 to its closing price last Friday, ComfortDelGro had delivered capital gains of around 70%. By comparison, the total returns of the SPDR STI ETF (SGX: ES3), an exchange traded fund which tracks Singapore’s market barometer the Straits Times Index (SGX: ^STI), was about 79% for the same duration. When the dividends are included though, ComfortDelgro inches ahead of the STI.

Where are the taxis and buses?

ComfortDelGro revenue breakdown

Source: Company Annual Report

For the financial year ended 2013 (FY2013), Singapore made up 59.5% of the company’s revenue. This is followed by the United Kingdom / Ireland and Australia taking up 21.4% and 12.9%, respectively, of ComfortDelGro’s FY2013 revenue.

Much of the revenue growth over the last five financial years came from Singapore and Australia. Sales in Singapore leapt forward about 29% while sales in Australia increased by an impressive 75%. The majority of the growth in Australia may have come from the bus segment. Additionally, the company’s fully owned subsidiary, Swan Taxi Pty Ltd, owns 93% of market share for taxi services in Perth, Australia. For the case of United Kingdom / Ireland, much of the growth may have come from the acquisition of First Group plc’s London operations. This had made Metroline Limited, ComfortDelgro’s wholly-owned subsidiary, the third largest scheduled bus operator with an 18% market share. On the flipside, sales in China have been disappointing, falling 22.8% over the same time period.

Beyond revenue, we would ideally like to see profit rise together with the revenue increases. For that, we look into the operating profit by country.

comfortdelgro operating profit breakdown

Source: Company Annual Report

Operating profit for Australia had excelled, increasing 139% over the past five financial years to make up 22.3% of ComfortDelgro’s operating profit in FY2013. China’s operating profit, perhaps, is the biggest surprise – it increased about 14% despite the corresponding 22% revenue drop over the same duration.

Foolish take away

As lifelong students of Foolish long term investing, it pays to look under the hood to understand whether a rise in a company’s share price is supported by the quality of growth that we are looking for.

Singapore remains the key sales and profit contributor for ComfortDelgro. When it comes to operating profit, countries such as Australia, United Kingdom/Ireland, and China may be the areas to look to. We might want to also look for revenue improvements from China for the long term growth of the company.

Based on last Friday’s close, ComfortDelgro trades at a price-to-earnings ratio of 19.4 and has a dividend yield of 3.1%.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn’t own shares in any companies mentioned.