ComfortDelGro turns 10, and is going strong

PHOTO: ComfortDelGro turns 10, and is going strong

SINGAPORE - Proving merger critics wrong, transport giant ComfortDelGro Corp has crossed its 10th year with a glowing report card.

The corporation - a union of taxi operator Comfort Group and DelGro Corp (a hived-off arm of Singapore Bus Services) - has seen its operating profit chalking up a compound annual growth rate (CAGR) of 7.9 per cent from 2003.

In revealing this in the company's latest annual report, chairman Lim Jit Poh noted that revenue had been rising at a CAGR of 6.5 per cent.

Total shareholder return (TSR) - which measures dividends paid, as well as rise in share price - posted a CAGR of 12.6 per cent. This matched the performance of local banks such as OCBC, United Overseas Bank and DBS Group Holdings, whose TSR over the last decade ranged between 9.5 per cent and 15.3 per cent.

Speaking to The Straits Times after the annual general meeting on Friday, Mr Lim said: "Ten years ago, the doubters came out in force and said the merger would never work. I would like to think that we have proven them wrong.

"ComfortDelGro is today one of the largest land transport companies in the world, with the largest footprint, spanning seven countries. This is certainly not something that came by chance, and I am very proud of what the group has achieved thus far."

Indeed, despite cost rises on almost every front, the group posted a record net profit of $248.9 million for the year that ended on Dec 31 last year - beating the previous high of $244.6 million in 2006.

Besides Singapore, the group has businesses in China, Australia, Ireland, Britain, Malaysia and Vietnam. In total, it employs more than 20,200 staff.

The group, however, missed its target of achieving 70 per cent of revenue from overseas. Mr Lim told shareholders on Friday it was now aiming to reap 50 per cent of operating profits from its businesses abroad - up from just over 40 per cent currently.

He said the group was still in a position to expand, noting that total assets stood at nearly $4.9 billion at the end of last year, while shareholders' funds hovered around $2.6 billion. Both had been posting a CAGR of more than 6 per cent.

"These are indications that while we have provided good dividends... we have also built up our financial strength for expansion," the chairman said, adding that the group will continue to set aside at least half of its profits as dividend payment.

In Singapore, Mr Lim noted that "land transport continues to come under intense scrutiny".

"This has become more pronounced in the past few years, as the population has increased dramatically and existing infrastructure is not able to cope," he said.

He added that it remains challenging for the group to balance the interests of commuters, regulators, unions and shareholders.

Industry watchers have observed that transport operators in Singapore are facing increasing profit pressure as the Government seeks to raise service standards while tempering fare adjustments.

Credit Suisse analyst Leonard Huo downgraded ComfortDelGro from "outperform" to "neutral" in February, a position he still holds.

ComfortDelGro's stock is currently hovering at $1.95, its highest level in more than five years.

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