To The Moon

ComfortDelGro - Slowly but Surely

The past few weeks were filled with trepidation as investors were praying for a final Santa rally only to be disappointed. With recession fears looming in recently weeks, I decided to opt for a more defensive play (some may even call it boring) - increasing my positions in $COMFORTDELGRO CORPORATION LTD(C52.SI)$  (“CDG”).

Some may cringe at the thought of a traditional SGX company. However, CDG has slowly pivoted from its traditional public transportation business to adopt new business models, including the latest EV charging stations with SP Group. This gives its investors some comfort (no pun intended) that management is trying to stay atop of the disruptions within the transportation industry.

For the latest Q3'22 earnings, it reported a 7.9% YoY increase in revenue and 31% YoY increase for PATMI. The improving operational results were backed by higher rail ridership and taxi passenger demand.

With the relaxation ofCOVID-19 measures in Singapore, this will help provide some buffer to the margins which isthreatened by the higher wages and inflationary pressures across various countries. This is further supported by the partnership betweenCDG and Gojek, which we may expect more areas of collaboration to be announced in the coming months from both management.

While CDG may not have the balance sheet like the local banks, its dividends payout has been decent (~3.4%) and is expected to remain robust. CDG may be a safe option with recessionary fear mounting since the transportation industry is generally quite recession resistant.

With price back at its 2020 lows, CDG's valuation may start to be attractive once again as a defensive play.

What is your strategy for 2023? Happy to hear your thoughts

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