Billion Dollar Club: AUTOMOBILES & AUTO PARTS + TRANSPORTATION
Unsurprisingly, the transport sector suffered significantly during the pandemic, as passenger traffic vanished within cities and across borders. With Covid-19 no longer posing the global public health threat it once did, traffic numbers have rebounded sharply, leading to an improvement in the financial performance of key companies within the industry.
Singapore Airlines (SIA) is a company and brand that needs no introduction. It enjoyed the confidence and support of its shareholders in the darkest days of the pandemic, with a rescue package totalling some $15 billion, which helped prevent the company from making deep cuts. With travel back with a vengeance, Singapore’s flag carrier was able to respond more quickly than its regional rivals and take back to the skies with a bigger capacity than most, soaring to record earnings of $2.68 billion for its year to March.
In the three financial years under consideration for this year’s Billion Dollar Club (BDC), SIA generated a CAGR of 7.4% in returns to shareholders, making it the winner of this category.
The overall winner of this sector, however, is ComfortDelGro C52 Corp, which is best known for being a key operator of buses, trains and taxis in Singapore. It runs the largest taxi fleet in the country, and via its separately listed unit, SBS Transit, it is a key operator of public buses. It also provides competition to incumbent SMRT Corporation by competing to bid for train lines.
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In addition to the top award for this industry sector, ComfortDelGro took home the growth in profit after tax (PAT) and weighted return on equity (ROE) awards, too. In the three years considered for this year’s BDC, ComfortDelGro generated growth in PAT of 43.7% and weighted ROE of 6.4%.
What makes the company interesting is not just its recovery from the pandemic and how its cash pile has remained intact throughout but also its active snapping up of overseas assets.
Over the past couple of years, ComfortDelGro has bought stakes or outright acquired taxi operators or won operating contracts in various overseas markets, especially the UK and Australia. They range from a multi-year contract to operate the metro in Stockholm, Sweden; it buttressed its presence in the UK by winning not just more bus operating contracts but also, most recently, acquiring Addison Lee, famous for its London black cabs, for GBP269.1 million ($461.2 million).
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On Aug 14, ComfortDelGro reported that in the half year to June 30, it has already generated 46.3% of its revenue from outside Singapore, up from 41.8% in 1HFY2023. When more overseas acquisitions are completed, and revenue recognition kicks in, this proportion is set to grow further.
Of course, domestic businesses helped lift its overall performance as well. Earnings for 1HFY2024 increased by 21.4% y-o-y — its fifth straight quarter of y-o-y growth — to $95.3 million on the back of a 13.7% y-o-y increase in revenue to $2.12 billion.
“Our focus on strengthening core businesses and pursuing profitable overseas growth has allowed us to deliver robust half-year results and secure a leading position in our key markets,” says managing director and group CEO Cheng Siak Kian. “We remain vigilant as we navigate the evolving macro-economic challenges and continue this momentum of building scale and new capabilities for the long term.”
