Strategic International Expansion Drives ComfortDelGro’s Growth Outlook Amidst Domestic Challenges

DBS analyst Zheng Feng Chee reiterated a Buy rating on Comfortdelgro (CDGLF – Research Report) today and set a price target of S$1.80.

Zheng Feng Chee has given his Buy rating due to a combination of factors influencing ComfortDelGro’s growth outlook. One of the primary reasons is the company’s strategic international expansion, which is expected to drive significant growth in the coming years. By acquiring international assets like A2B, CMAC, and Addison Lee, ComfortDelGro is poised to increase its international operating profit contribution, potentially surpassing its domestic earnings by FY26F. This expansion is seen as a way to offset the weaker performance in Singapore and higher interest costs associated with recent acquisitions.
Furthermore, despite a slight downward revision in FY25F earnings, the overall growth trajectory remains strong with robust earnings growth projected for FY24 and FY25. The valuation of ComfortDelGro is considered attractive, supported by a favorable PEG ratio and dividend yield when compared to industry peers. The target price is maintained at SGD1.80, reflecting a premium to its historical average, which underscores the confidence in the company’s future performance. Key risks include potential inflation in the UK, currency fluctuations, and the performance of Addison Lee, but these are seen as manageable within the broader growth strategy.

Feng Chee covers the Consumer Defensive sector, focusing on stocks such as PepsiCo, Delfi, and Coca-Cola. According to TipRanks, Feng Chee has an average return of -5.5% and a 53.85% success rate on recommended stocks.

In another report released on May 16, Phillip Securities also maintained a Buy rating on the stock with a S$1.68 price target.