ComfortDelgro Corporation Ltd’s Latest Earnings: Profit Grows 8%, But Is It Sustainable?

Yesterday evening, Comfortdelgro Corporation Ltd (SGX: C52) reported its fiscal first-quarter earnings. The reporting period was for 1 January 2016 to 31 March 2016.

Comfortdelgro is a global land transport giant with operations mainly in Singapore, Australia, the United Kingdom, and China. The company has a total fleet size of over 46,500 buses, taxis and rental vehicles. It is also the majority owner of vehicle and non-vehicle testing and inspection outfit Vicom Limited (SGX: V01) and bus and rail services operator SBS Transit Ltd  (SGX: S61).

You can learn more about Comfortdelgro in here and here. You can also look up the results from its previous quarter here.

Financial highlights

The following’s a quick rundown on some of the latest financial figures for Comfortdelgro:

  1. Revenue for the reporting quarter climbed by 3.3% to $996 million. Sales growth came from the bus, taxi, and rail operations, offset by lower revenue from automotive engineering services.
  2. For the reporting quarter, net profit attributable to shareholders increased by 8.6% year-on-year to $73.4 million.
  3. Consequently, earnings per share (EPS) was 3.4 cents, up 8.2% from the 3.14 cents reported in the same quarter last year.
  4. In the reporting quarter, cash flow from operations was $221.5 million with capital expenditures clocking in at $77.1 million. The combination gave Comfortdelgro positive free cash flow of $144.4 million, up significantly from the $13 million seen in the same quarter a year ago ($151.4 million in cash flow from operations and $138.4 million in capex).
  5. As of 31 March 2016, Comfortdelgro had $887.9 million in cash and equivalents and $487 million in debt. This is an improvement from the previous sequential quarter, when it had $787.8 million in cash and equivalents and $558.6 million in debt.

In summary, Comfortdelgro saw low top-line growth, but was able to grow its bottom-line at a respectable rate. This is a familiar pattern that was seen in the previous year as well. The land transport firm also reported much better free cash flow and a stronger balance sheet.

Operational highlights and a future outlook

Comfortdelgro’s bus operations revenue was $492 million for the first-quarter of 2016, an increase of 3% year-on-year. Growth was driven by an increase in SBS Transit’s average daily ridership.

Meanwhile, taxi operations revenue also grew by 3.7% year-on-year to $333.7 million. The segment’s growth was supported by higher rental income from a larger operating fleet. Elsewhere, rail operation’s sales soared 27.4% year-on-year to $65 million.

Going forward, Comfortdelgro expects to see growth from its rail operations. The rail operations is expected to benefit from the opening of the Downtown Line Stage 2 in Singapore’s mass rapid transit network. Comfortdelgro also expects its taxi sales top-line to be maintained.

But, there could be some room for worry elsewhere. Comfortdelgro expects its revenue for its Singapore bus operations to be lower due to fare revenue reduction and the gradual transition out of the Bulim and Loyang bus services.

As usual, management cautioned that costs remain under pressure.

At its closing share price yesterday of $2.77, Comfortdelgro traded at over 19 times trailing earnings with a dividend yield of around 3.2%.

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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 owns shares in Vicom.