MENU

Understanding The Profitability of ComfortDelGro Corporation Ltd’s Various Businesses

ComfortDelGro Corporation Ltd (SGX: C52) is a land transport company with operations mainly in Singapore, Australia, the United Kingdom, and China. 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).

In a previous article, I wrote about the different revenue sources of the company. ComfortDelGro has eight business segments in total. I thought it’d be interesting to have a follow up on the profitability of the top five business segments by revenue. Here are the five main segments we’d be looking at: Bus, Taxi, Automotive engineering services, Rail, and Inspection and testing services.

comfortdelgro-business-segment-profitability-table
Source: ComfortDelGro 2015 annual report

In the table above, you can see a row that reads ‘Operating profit/asset’ – what I’ve done is to simply divide each segment’s operating profit with its asset. The ratio will allow us to compare the efficiency of each business segment in using their assets to generate a profit.

Though the Bus segment is the largest in terms of revenue and operating profit, it is one of the least efficient in utilising its assets to generate a profit – its operating profit to asset ratio was merely 7% in 2015.

On the other hand, the Automotive engineering service and the Inspection and testing services segments are great profit generators since both deliver much higher operating profits for each dollar of asset employed as compared to the Bus segment.

By looking at the profitability of ComfortDelGro’s various segments, investors can better understand the economic characteristics of the different businesses within the group. This can help investors make more-informed investment decisions.

If you like what you've seen, you can get even more investing insights and analyses from The Motley Fool's weekly investing newsletter Take Stock Singapore. It's FREE, so do check it out here.

Also, like us on Facebook to follow our latest news and articles. The Motley Fool's purpose is to help the world invest, better.

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.