What Does ComfortDelgro Corporation Limited’s Cash Flow Tell Us About Its Dividend
- Original Post from The Motley Fool Sg

ComfortDelgro Corporation Limited (SGX: C52) is a transport company with operations mainly in Singapore, Australia, the United Kingdom, and China. It’s the largest taxi operator in Singapore and also the majority owner of vehicle and non-vehicle testing and inspection outfit Vicom Limited (SGX: V01) and bus and rail services operator SBS Transit Ltd (SGX: S61).
As a quick recap, what we are trying to do here is to address the following question:
Is Comfortdelgro’s current dividend sustainable in the foreseeable future?
To address the above question, we will use three simple tests 1) the company’s track record in making profit 2) free cash flow and dividend analysis 3) balance sheet strength to give us an overview.
In this article, we will look at the analysis of the free cash flow and dividend payments in the last 5 years.
Readers can click here and here for the other 2 parts of the analysis.
Free cash flow:
For ComfortDelGro to pay dividends, it must be able to generate cash, pay its bills, invest in capital expenditure and pay out dividends from the left over cash. In financial term, the leftover cash after paying the bills and capital expenditure is known as free cash flow.
The idea here is pretty straight forward – a company cannot sustainably pay out more dividend than its free cash flow in the long term.
So what we want to find out here is whether the company has kept its dividend payments in the past 5 years within its means.
So let’s look at a graph to illustrate the free cash flow and dividend paid in the last 5 years:

And for those who are interested in how the numbers are derived, please see below:
Free cash flow analysis:
S$ million
2012-12
2013-12
2014-12
2015-12
2016-12
Operating cash flow
657
670
713
717
808
Interest and dividend received
17
16
16
17
17
Interest paid/payment to non-controlling shareholders
-33
-28
-33
-32
-31
Capital expenditure (net disposal)
-484
-415
-471
-388
-388
Other acquisitions/divestments
25
-141
-29
-2
-1
Free cash flow
182
102
196
313
405
Dividend paid to shareholders
130
138
165
183
199
 Source: Comfortdelgro 2012 to 2016 Annual Reports
Note – free cash flow calculation may not be exactly the same as other sources due to difference in adjustments used.
From the above, we can see that ComfortDelGro free cash flow to dividend payment has remained reasonable throughout the years. Only once in the last 5 years did the company pay more dividend that its free cash flow.
During the period, total free cash flow was about $1.2 billion whilst total dividend paid was about $0.8 billion.
Conclusion:
ComfortDelGro has mostly kept dividend payments within its means in the last five years.
In the absence of any significant decline in free cash flow, the company should be able to sustain the current dividend payout ratio.
We will now proceed to our final test here.
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Are Ride-Hailing Companies Still a Threat to ComfortDelGro?
- Original Post from The Motley Fool Sg

ComfortDelGro Corporation Ltd (SGX: C52), or Comfort for short, is a land transportation behemoth with business interests in bus, rail, and taxis. Aside from Singapore, the group has a presence in six other countries – China, the UK, Australia, Malaysia, Ireland and Vietnam.


Investors can recall the troubles associated with Comfort’s taxi fleet when Uber Technologies Inc (NYSE: UBER) started to operate and expand its fleet aggressively in Singapore back in 2013. In that same year, Grab Singapore (a home-grown ride hailing company) also started its operations and expanded aggressively with the assistance from venture capitalists.


The price wars got so bad from 2013 through to 2018 that Comfort’s taxi fleet shrank to its lowest level in a decade, to just 13,244 (down 22% from its December 2015 fleet size). In March 2018, Uber was sent packing from Singapore when Grab acquired its Southeast Asian operations, just months after Comfort had signed a strategic collaboration deal with Uber.


So the key issue is one many Singaporean companies will have to grapple with – potential disruption. More specifically for Comfort though, are ride-hailing companies such as Grab and Gojek (a new Indonesian ride-hailing company which entered Singapore in late-2018) still a major threat to it?


Comfort adding 200 taxis to its fleet


Comfort announced recently that it was adding 200 new taxis to its fleet, in what was the first addition to the fleet in 18 months. According to the group, this was due to more people switching from driving private hire cars to driving taxis instead, as driving taxis was more “stable”. The last time Comfort placed an order for taxis was in December 2016.


Dynamic fare implementation


Barely two weeks ago, Comfort declared its intention to implement dynamic pricing, along with a plan to open up its booking app to Grab and Gojek drivers. Though reasons remain unclear at this point, this move may be an attempt to stem the exodus of taxi drivers into the private hire market. The problem is that this move may backfire as it will start to blur the lines between taxis and private hire cars, with commuters lumping them together as one and the same.


Grab and Gojek attempt to become “super-apps”


Grab and Gojek are also not sitting still, with both companies adding to their respective fleets too. However, these companies also have a larger purpose in mind, which is to become a “super-app” for users to access all kinds of services, similar to the concept of an “app within an app” developed by Chinese companies such as Tencent Holdings Ltd (HKSE: 700). This goal makes them spread their resources out to different functions rather than simply ride-hailing alone and could provide some respite to Comfort.


Stabilising ride


The above evidence points to a stabilising situation for Comfort, as they are beginning to order new taxis again, possibly signalling increased demand for taxis in the near future. However, the planned implementation of dynamic pricing could work against Comfort if it cannot differentiate itself from the ride-hailing companies. This is something investors need to watch closely for developments.


In addition, Grab and Gojek are no pushovers either as both companies, though unprofitable, have massive funding backing them. So even if it looks as though the battle may be over for now, another war could be about to commence.


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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 Royston Yang does not own shares in any of the companies mentioned. The Motley Fool Singapore has recommended shares of Tencent Holdings Ltd.


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ComfortDelGro’s Latest Earnings: Strong Start to the Year
- Original Post from The Motley Fool Sg

ComfortDelGro Corporation Ltd (SGX: C52) is a Singapore-based land transportation conglomerate with business interests in the bus, taxi and rail services. Apart from Singapore, it has a presence in six other countries, namely, China, the UK, Australia, Malaysia, Ireland, and Vietnam.


ComfortDelGro announced its financial results for the first quarter ending 31 March 2019, yesterday. Let’s have a quick look to see how it did.


Financial highlights


Here are some of the key financial highlights from the latest full-year results:


1) Revenue grew 7.8% year-on-year to S$947.3 million. The increase in revenue was on the back of strong contributions from new acquisitions which accounted for close to 80% of the increase in revenue.


2) Total operating costs followed suit increased by 7.3% to S$839.9 million. The increase in operating cost was due to staff costs associated with the new acquisitions.


3) As a result, operating profit rose by 12.2% to S$107.4 million.


4) Profit attributable to shareholders saw a 6.2% rise, from S$66.3 million to S$70.4 million.


5) Consequently, earnings per share moved from 3.06 cents to 3.25 cents, up 6.2%.


6) As of 31 December 2018, ComfortDelGro’s balance sheet had S$586.1 million in cash and bank balances, and S$569.9 million in total debt. This translates to a net cash position of S$16.2 million. This is lower year-on-year when compared to 2017 when ComfortDelGro reported a net cash position of S$273.9 million.


7) Operating cash flow, improved by 49.1%, from S$64.1 million a year ago to S$95.6 million. Capital expenditure, on the other hand, increased from S$37.7 million to S$95.2 million. This resulted in ComfortDelGro’s free cash flow dropping sharply by 98.5%, from S$26.4 million S$0.4 million.


Outlook


ComfortDelGro Managing Director/Group CEO, Mr. Yang Ban Seng, commented,


“The robust first quarter’s results show growth from the new acquisitions as well as existing businesses. The acquisitions we made in the last year have started to reap returns and we expect that they will continue to do so. We will continue to grow our core businesses, look at investment opportunities and explore new areas for growth, particularly in those that leverage technology and strengthen our core expertise.”


ComfortDelGro’s share price ended trading on Tuesday at S$2.57, resulting in a price-to-earnings ratio of 18.4 and a dividend yield of 4.1%.


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Motley Fool writer Esjay contributed to this article. Esjay does not own shares in Comfortdelgro.


The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Tim Phillips doesn’t own shares in any companies mentioned.


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1 Simple Number for Understanding 3 Important Areas of SBS Transit Ltd’s Business
- Original Post from The Motley Fool Sg

SBS Transit Ltd (SGX: S61) operates public bus and rail services in Singapore. The company is a subsidiary of local land transport giantComfortDelGro Corporation Ltd (SGX: C52).


Today we’re digging deep into SBS Transit’s return on equity, or ROE.


The choice of ROE


We’re using one metric — the return on equity, or ROE — to understand SBS Transit’s business. This financial metric gives investors important insight into a company’s ability to generate a profit using the shareholders’ capital it has.


A ROE of 20% means a company generates 20 cents in profit for every dollar of shareholders’ capital invested. In general, the higher a company’s ROE, the more profitable it is. A high ROE can also be a sign that a company has a high-quality business.


It’s worth noting that the use of high leverage — which increases the financial risk faced by a company — can also increase a company’s ROE.


Calculating the ROE


The ROE can be calculated using the following formula, which is the way many investors do it:


ROE = Net Profit / Shareholder’s Equity


The metric can also be calculated using a different approach, as shown below:


ROE = Asset Turnover x Net Profit Margin x Leverage Ratio


Calculating a company’s ROE in this way will reveal three important things: How well a company is managing its assets, how efficient it is at turning revenue into profit, and how much financial risk it could be taking on. You canlearn moreabout this formula for the ROE.


With that, let’s turn our attention to the ROE of SBS Transit.


The actual numbers


Asset turnover measures the efficiency of a company in using its assets to generate revenue. It is calculated by dividing a company’s total revenue by its assets. SBS Transit had total revenue of S$1.38 billion and total assets of S$1.06 billion in its fiscal year ended 31 December 2018. This gives it a good asset turnover of 1.30.


The net profit margin measures the percentage of revenue left as profit after deducting all expenses.In 2018, SBS Transit had a low net profit margin of 5.8% given its net profit of S$80.1 million and revenue of S$1.38 billion.


Lastly, we have the leverage ratio, calculated by dividing a company’s total assets by equity.Ahigher ratio means a company is funding its assets with more liabilities, resulting in higher risk.In 2018, SBS Transit had total assets and total equity of S$1.06 billion and S$498.4 million, respectively, giving it a healthy leverage ratio of 2.13.


When we put all of the numbers together, we arrive at a strong ROE of 16% for SBS Transit for 2018.


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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. The Motley Fool Singapore recommends SBS Transit Ltd.


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SBS Transit Ltd’s Share Price Was Up By 37% Last Year. Is It a Good Business?
- Original Post from The Motley Fool Sg

SBS Transit Ltd (SGX: S61) operates public bus and rail services in Singapore, operating mainly in two segments: public transport services (the bus and rail services) and other commercial services (advertising and rental income). SBS Transit is a subsidiary of local land transport giantComfortDelGro Corporation Ltd(SGX: C52).


At the current price of S$3.60 (at time of writing), the company’s stock is up about 37% in the last 12 months. If SBS Transit has a high-quality business, its current low stock price could be an investment opportunity. There’s no easy way to know if SBS Transit’s business is of high-quality, but a simple metric can help shed some light: return on invested capital (ROIC).


A brief introduction to the ROIC


In a previousarticle, I explained how ROIC can be used to evaluate the quality of a business.



The simple idea behind the metric is that a business with a higher ROIC requires less capital to generate a profit, and it thus gives investors a higher return per dollar that is invested in the business. High-quality businesses tend to have high ROICs, while the reverse is also true — a low ROIC is often associated with a low-quality business.


You can see how the math works for ROIC in the formula above.


SBS Transit’s ROIC


The table below shows SBS Transit’s ROIC using numbers from its fiscal year ended 31 December 2018 (FY2018).



Source: SBS Transit’s Financial Statements


In FY2018, SBS Transit generated a ROIC of 14.7%. This means for every dollar of capital invested in the business, SBS Transit earned 14.7 Singapore cents in profit. The company’s ROIC of 14.7% is above the average based on the ROICs of many other companies I have studied in the past. This suggests that SBS Transit has an above-average business.


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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. The Motley Fool Singapore recommends SBS Transit Ltd.


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ComfortDelGro’s Latest Earnings: Uninspiring Profits
- Original Post from The Motley Fool Sg

ComfortDelGro Corporation Ltd (SGX: C52) is a land-transportation conglomerate with business interests in bus, taxi and rail services.


Apart from Singapore,it has a presence in six other countries, namely, China, United Kingdom, Australia, Malaysia, Ireland, and Vietnam.


ComfortDelGro announced its financial results for the full year ended 31 December 2018, yesterday.


Here are some of the key financial highlights from the latest full-year results:


1) Revenue grew 6.4% year-on-year to S$3.80 billion.


2) Total operating costs followed suit –increased by 6.3% to S$3.37 billion.


3) As a result, operating profit rose slightly by 2.8% to S$358.8 million.


4) Profit attributable to shareholders saw a 0.6% rise, from S$301.5 million to S$303.3 million.


5) Consequently, earnings per share moved from 13.95 cents to 14.01 cents, up 0.4%.


6) As of 31 December 2018, Comfortdelgo’s balance sheet had S$586.1 million in cash and bank balances, and S$569.9 million in total debt. This translates to a net cash position of S$16.2 million. This is lower year on year, when Comfortdelgro reported a net cash position of S$273.9 million.


7) Operating cash flow, improved by 14.9%, from S$581.9 million a year ago to S$668.8 million. Net capital expenditure, on the other hand, decreased from S$283.6 million to S$226.1 million. This resulted in Comfortdelgro’s free cash flow surging by 48.4%, from S$298.3 million to S$442.7 million.


8) A final dividend of 6.15 cents was declared bringing the full year dividend to 10.5 cents, increasing by 0.96% year on year.


The increased top-line of 6.4% to S$3.8 billion for 2018 was due to higher revenue from new acquisitions and an increase in revenue from Public Transport Services, Inspection & Testing services, and Driving centre businesses. This was offset by weakness seen in the Taxi Business and the Automotive Engineering Services Business.


Operating costs increase in line with revenue due to higher staff cost, higher fuel, and electricity cost and higher repair and maintenance requirements.


Outlook


Going forward, Comfortdelgro commented that revenue from its Public Transport services in Singapore is expected to grow together with its Australian Bus Business. The Taxi business is expected to be maintained amidst the keener competitive environment. Other business segmented expected to be maintained are its Automotive engineering services, Inspection & Testing services, and Driving centre businesses. Lastly, its Car rental and Leasing business are expected to be lower.


Comfortdelgro also commented:


“The operating environment is expected to remain challenging. The Group will continue to manage costs prudently and seek growth and acquisition opportunities”


Comfortdelgro’s share price ended the day on Wednesday at S$2.38, resulting in a price-to-earnings ratio of 16.9 and a dividend yield of 4.4%.


Click here nowfor yourFREEsubscription toTake StockSingapore, The Motley Fool’s free investing newsletter. Written byDavid Kuo,Take Stock Singaporetells you exactly what’s happening in today’s markets, and shows how you can GROW your wealth in the years ahead.


TheMotley Fool’s purpose is to help the world invest, better.Like us on Facebook to keep up-to-date with our latest news and articles.


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The Motley Fool Singapore writer, Esjay,contributed towards this article. Esjay does not own shares in ComfortDelGro.


The information provided is for general information purposes only and is not intended to be personalised investment or financial advice.


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