ComfortDelGro rides on public transport to buoy revenue growth

The Seletar bus package's contributions will kick in starting March.

ComfortDelGro Corporation Limited (CDG) is relying on its public transport services in Singapore to sustain revenue growth, as the Seletar bus package's contributions will kick in starting March, RHB Research said.

Singapore Business Review previously reported CDG's lower profits were partially offset by a 3.6% gain in public transport services to $2.39b.

According to DBS Equity Research, the public transport services segment accounted for around 60% and around 44% of group revenue and operating profit, respectively, in 2017.

Within its services in Singapore, UK, and Australia, revenue and earnings drivers are based on tenders for routes coupled with CDG meeting the service requirements set forth by the authorities.

RHB said the increase in daily ridership for Downtown Line (DTL) should moderate losses at its rail business.

Whilst the current daily DTL ridership of 450,000 is close to the estimated breakeven of 510,000, lower average fares in 2018 would mean DTL may only breakeven in 2019.

Meanwhile, DBS Equity Research expects rail operations to only be neutral due to their subdued profitability since 2013 with the operating costs of DTL.

CDG expects the revenue from its Australian bus businesses to rise as well.

RHB analyst Shekhar Jaiswal added, "Whilst revenue from the UK bus business is likely to improve in constant currency terms, it believes unfavourable forex would result in YoY decline in revenue for its UK business."