How Does ComfortDelGro Corporation Ltd Generate Its Profit?

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 has been in the limelight recently because it is facing a structural challenge in its Taxi business due to the rise of ride-hailing companies such as Grab and Uber. As such, I decided to take a deeper look into ComfortDelGro’s business model.

There are seven business segments in the company. In this article, I want to run through each of them quickly.

Breakdown of profit by business segments

The chart below shows the operating profits generated by each of ComfortDelGro’s seven business segments since 2012:

Source: ComfortDelGro’s 2016 annual report

You can see that Public transport services and Taxi have been the two most important segments for ComfortDelGro – in terms of operating profit – over the last five years.

The different segments

The bulk of the income from the Public transport services segment comes from ComfortDelGro running public bus and rail services, scheduled transport services, and coach rental services.

Income from the Taxi segment is generated through renting out taxis, operating taxi bureau services, and providing ancillary advertising services (those adverts you see on taxi bodies).

The third largest segment by operating profit in 2016 was Automotive engineering services. In here, ComfortDelGro is involved with maintenance and repair services, construction of specialised vehicles, assembly of bus bodies, crash repair services, engineering services, and the sale of diesel.

The Inspection and testing segment generates its income through providing motor vehicle inspection services and non-vehicle testing, inspection, and consultancy services. This part of the business comes from ComfortDelGro’s majority ownership of another Singapore-listed company, VICOM Limited (SGX: V01).

The rest of the segments are pretty straightforward, and only contribute a small amount of operating profit to ComfortDelGro on an individual basis.

A Foolish conclusion

There are many moving parts when it comes to ComfortDelGro’s business. By understanding how ComfortDelGro makes money, it can help current and prospective investors in the company to form better judgments on its long-term prospects.

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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.