ComfortDelGro Corporation Ltd’s Stock Price Is Down By 28% In The Last 12 Months: Here Are 2 Positive Things About The Company Now

ComfortDelGro Corporation Ltd (SGX: C52) is a land-transport company with operations in seven countries (Singapore, China, the United Kingdom, Ireland, Australia, Vietnam, and Malaysia). It is one of the largest land-transport companies in the world with its fleet size of around 44,000 buses, taxis, and rental vehicles.

The company is facing a structural challenge in its Taxi business due to the rise of ride-hailing companies such as Grab and Uber. As a result, the Taxi business has seen declines in revenues and operating profits in the last few quarters.

The problems at the Taxi business have likely contributed to ComfortDelGro’s 28% decline in its stock price.

Yet, despite all the gloom and doom, there are still some positive aspects about the company that investors should take note of. Here are two:

1. The bright spot

Here’s a table showing the year-on-year changes in revenue and operating profit that each of ComfortDelGro’s business segments experienced in the second quarter of 2017:

Source: Comfortdelgro 2017 second quarter earnings announcement

You can see that ComfortDelGro’s Public Transport segment delivered a strong performance in the quarter, with revenue up by S$8 million. This happened despite unfavorable currency movements.

Furthermore, ComfortDelGro’s outlook for this segment for the rest of year remained positive, with higher revenue expected from both Singapore and Australia, which offsets a weaker outlook from the UK.

As the biggest revenue and profit contributor to ComfortDelGro, the Public Transport segment’s positive outlook should provide some comfort to investors amid the challenges faced by the company’s other segments.

2. A strong balance sheet

One other factor that should provide comfort to investors is ComfortDelGro’s pristine balance sheet despite operating in a highly capital intensive industry.

As of 30 June 2017, ComfortDelgGo had S$606.6 million in cash and cash equivalents and S$377.1 million in total debt. This gives it a net cash position of S$229.5 million.

Having a strong balance sheet allows ComfortDelGro to weather the challenges that it’s currently facing without the need to worry about financial constraints. It buys the company time to fix its problems.

The threat of ride-hailing companies eroding ComfortDelGro’s Taxi business is real. What’s more, the potential appearance of autonomous vehicles in the future could result in a complete change in the taxi industry.

But, ComfortDelGro still has a strong Public Transport business. Furthermore, with its clean balance sheet, the company has the financial breathing room to try and overcome its challenges.

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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.