ComfortDelGro Corporation Ltd (SGX: C52) is one of the largest land transport companies in the world, with operations in seven countries, including Singapore. Here are three reasons to like ComfortDelGro as an investment.
Strong balance sheet
A company’s balance sheet gives investors a quick snapshot of what it owns and what it owes on a particular date. A company with a strong balance sheet has more cash than debt; better still are companies that are flush with cash with no borrowings. Companies with a robust balance sheet are more likely to survive a financial crisis and are very unlikely to go bust when the economy turns sour.
As for ComfortDelGro, it had S$623.1 million in cash and short-term deposits, and S$597.1 million in borrowings, as of 31 March 2019. This translates to a net cash position of S$26 million, an improvement from the figure of S$16.2 million at the end of 2018.
The following shows ComfortDelGro’s balance sheet highlights as of the 2019 first-quarter:
Source: ComfortDelGro Q1 2019 earnings presentation
Consistent dividend payer
ComfortDelGro has been the stuff of dreams for income investors. From 2008 to 2018, the company has grown its dividend per share from 5.0 Singapore cents to 10.5 Singapore cents, translating to an annualised increase of 7.7%. During those years, ComfortDelGro’s dividends were also well-protected, with the dividend payment not going above the earnings in any of the years.
Such sustainable dividend growth would be the envy of many companies who are struggling to grow their dividends consistently.
Investments in new ventures
In November 2018, ComfortDelGro announced that it was setting up a US$100 million corporate venture capital fund to focus on incubation and investments in mobility technologies and solutions to complement its existing land transport business.
With that, the group revealed last month that it “has made three strategic investments in transport-related technology start-ups in the areas of on-demand bus technology, fleet management, and autonomous vehicle safety testing”.
In its press release, the land transport giant’s managing director, Yang Ban Seng, said:
“Even as we continue to look at ways to grow our existing businesses, we are pursuing strategic investments in new and emerging technology start-ups which bridge the gap between what is, and what could be. We are excited about the possibilities these new tie-ups may bring to the table in the area of smart urban mobility and transportation. We are building a new wing beyond the core passenger transport business.”
Although the ventures may not contribute significantly to revenue in the near-term, it is a step in the right direction for ComfortDelGro. It also shows that the company’s management is not resting on its laurels and letting its business get disrupted by new technologies.
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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 Sudhan P doesn’t own shares in any companies mentioned.