The Different Ways ComfortDelGro Corporation Ltd Makes Its Money

ComfortDelGro Corporation Ltd (SGX: C52) is a large company in a variety of ways. It has a sizeable market capitalisation of S$5.95 billion, it is one of the world’s largest land transport companies, and it has a fleet of over 46,500 buses, taxis, and rental vehicles.

The company’s operations are mainly in Singapore, Australia, the United Kingdom, and China. It is also the majority owner of two other Singapore-listed companies, the vehicle and non-vehicle testing and inspection outfit Vicom Limited (SGX: V01), and bus and rail services operator SBS Transit Ltd (SGX: S61).

As investors, we need to understand a company before we invest in it. The legendary investor Warren Buffett once wrote, ”We look for companies that have a) a business we understand; b) favourable long-term economics; c) able and trustworthy management; and d) a sensible price tag.” This underscores the importance of understanding a business.

For anyone who’s interested in ComfortDelGro, here’s a look at how the company makes its money.

Source: ComfortDelGro 2015 Annual Report

From the table above, we can see that ComfortDelGro earns the majority of its revenue (more than half, in 2015) from the Bus business segment. This is where the company runs bus services.

Income is generated through avenues such as bus fare collections, contracted revenue for operation of scheduled services, the provision of coach rental services and even ancillary advertisement income.

The next biggest segment by revenue is Taxi, which has a 32% slice of the pie. This segment earns revenue from renting out taxis, providing taxi bureau services, and also advertising.

Automotive Engineering Services is the third largest segment, but its share of ComfortDelGro’s 2015 revenue, at just 5.8%, is a lot smaller than the two segments mentioned earlier.

In this segment, ComfortDelGro earns revenue by providing vehicular maintenance and repair services, constructing specialised vehicles, assembling bus bodies, undertaking crash repairs, and more.

Rail is the last segment that individually accounts for over 5% of ComfortDelGro’s revenue. Income is generated through the collection of rail fares and advertising that takes place on rail-related assets.

Of the remaining 5.2% of ComfortDelGro’s revenue, half of that comes from inspection and testing activity which is related to its subsidiary Vicom.

Foolish Summary

ComfortDelGro may have different operating segments, but it still generates most of its revenue via land transport businesses. Thus, the company may be exposed to risks that can affect a large swath of its business concurrently.

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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 Lawrence Nga doesn’t own shares in any companies mentioned.