UOBKH downgrades ComfortDelGro to ‘hold’ as Q1 earnings disappoint

[SINGAPORE] ComfortDelGro (CDG) has been downgraded to “hold” from “buy” by UOB Kay Hian, following a first-quarter financial performance that fell significantly short of market expectations.

In a report on Thursday (May 14), the brokerage also slashed its target price for the land transport operator by 15 per cent to S$1.54, down from S$1.82 previously.

The transport player’s net profit fell 16.1 per cent to S$40.5 million in the first quarter ended Mar 31, amid challenges in the taxi and private-hire vehicle business.

For the first quarter ended Mar 31, CDG’s core operating profit fell 18 per cent year on year to S$66.2 million, while core profit after tax and minority interests (Patmi) slid 16 per cent to S$40.3 million.

The lacklustre performance came despite a 5 per cent increase in revenue to S$1.2 billion. Both core operating profit and Patmi missed expectations, UOBKH said, achieving just 17 per cent of the research house’s and consensus full-year forecasts.

“We lower our 2026-28 earnings forecasts by 19 per cent, primarily on a material downgrade to point-to-point operational profit due to higher fuel costs, Singapore taxi fleet contraction, persistent UK airport transfer headwinds and Australian competitive pressures,” said analysts Heidi Mo and Kai Jie Tang.

Headwinds from taxi segment

The sharp earnings miss was primarily driven by a severe contraction in CDG’s taxi and point-to-point (P2P) transport segment, where operating profit collapsed by 45 per cent year on year and 31 per cent sequentially to S$17.5 million.

Consequently, core operating margins contracted 5.1 percentage points to 7.3 per cent.

“The decline was across all geographies,” the analysts said.

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Domestically, CDG’s Singapore taxi fleet continued its downward trajectory, shrinking to 7,556 units by March 2026 from 8,424 at the end of 2024. The local market share slipped to 61.7 per cent as rival GrabCab aggressively expanded its taxi fleet from 20 to 420 vehicles over a nine-month period.

In international markets, the group’s Australian A2B business faced “intensifying ride-hailing competition and cautious consumer spending”.

Concurrently, long-haul inbound travel to the United Kingdom remained suppressed due to the ongoing Middle East conflict, which directly reduced airport transfer volumes for its premium private hire arm, Addison Lee.

Considering these headwinds, UOB Kay Hian lowered its 2026 P2P operating profit forecast for the company by about 40 per cent to S$93 million.

Public transport cushions

Providing some insulation to the group was the public transport segment, which posted a revenue increase of 7 per cent year-on-year to S$814.5 million.

This was supported by higher daily ridership on the North East Line and Downtown Line, up 2.7 per cent and 2.1 per cent, respectively, which flowed through alongside a rail fare adjustment implemented in December 2025. Operating profit for public transport rose a modest 3 per cent to S$37.7 million.

Meanwhile, CDG’s inspection and testing segment delivered a strong beat on operating profit, which rose 34 per cent year on year to S$12.1 million.

This performance was lifted by peak installation volumes of ERP 2.0 on-board units, though analysts caution that contributions are “expected to taper progressively” over the rest of the year.

Outlook

The research house noted that “P2P headwinds and the absence of a near-term recovery catalyst remain”.

Near-term swing factors that investors should monitor include the upcoming tender results for the Serangoon-Eunos bus package expected in the third quarter of 2026.

Conversely, the loss of the Tampines bus package to Go-Ahead, effective July 2026, will present a modest headwind, analysts said.

Despite the downgrade to operational growth, the group said that CDG’s dividend yield “remains decent at 5.1 per cent”.

As at the trading break on Monday, shares of ComfortDelGro were flat at S$1.28.