To The Moon

Earnings Review:

• ComfortDelGro( $ComfortDelGro(C52.SI)$ ) released its earnings on February 29, and since the announcement, its share price has slightly increased by 0.74% to SGD1.36.

• The company experienced a 2.6% growth in revenue, and its operating income rose by 0.77% in 2023.

• The Public Transport segment, which constitutes 76% of the total revenue and 44% of the total operating profit, witnessed a 2.5% year-on-year increase in revenue.

• However, there was a 3.4% decrease in operating profit in 2023. Notably, the operating profit margin for Public Transport was disappointing, standing at only 4% in 2023 compared to 4.2% in 2022.

• According to the management, there are ongoing renewals of UK bus contracts, which are expected to result in improved profit margins in 2024.

• It's worth mentioning that bus revenues are expected to decline starting September 1, 2024, as the Jurong West bus package was not successfully renewed upon expiry.

• On a positive note, the Taxi & Private Hire segment experienced a substantial 52.44% increase in operating profit in 2023. The operating profit margin also showed significant improvement, reaching 18.5% in 2023 compared to 12.5% in 2022. This improvement can be attributed to higher fleet utilization in China and increased fuel sales in Singapore, which boosted the segment's operating profit in the fourth quarter of 2023.

Conclusion:

• Taxi and Private Hire segment currently serves as the primary growth driver for ComfortDelGro, but investors should not get overly excited as the market's potential is limited by a declining taxi fleet.

• While the Public Transport segment was expected to be the key investment focus, it has consistently fallen short of expectations. Notably, the operating profit margin for the Public Transport segment declined from 7.79% in 2019 to 4% in 2023.

• The introduction of increased bus and train ride fees from December 23, 2023, and a rise in Singapore rail ridership are anticipated to positively impact revenue in the Public Transport segment. However, uncertainties linger regarding the profitability of the UK business.

• In summary, ComfortDelGro's stock stands to gain from the resurgence of Chinese tourists, facilitated by the 30-day visa-free travel policy and a SGD300 million injection into the Tourism Development Fund. Nonetheless, the sluggish recovery in the Public Transport segment may dampen investor interest.

• I currently maintain a neutral stance on ComfortDelGro as I await further improvement in the operating margin of the Public Transport segment. We prefer SIA( $SINGAPORE AIRLINES LTD(C6L.SI)$ ), Far East Hospitality Trust( $Far East HTrust(Q5T.SI)$ ) and Genting Singapore to

  gain exposure to Singpore tourism recovery.

Source: Company Presentation Slide