Why Australia is a greener pasture for ComfortDelgro

CGD aquires two bus lines of Deane’s Transit Group for AUD53m.

According to MayBank, while the Singapore local public transport scene is beset with challenges ranging from rising labour, energy and maintenance costs, signs point overseas for CDG’s business expansion.

"Australia has been highlighted by management for its resilient economy and continued population growth to drive transport demand. In addition, the Australian bus segment business operates primarily under contract from municipal authorities with no revenue / ridership risk from fares, and has built-in cost indexation to provide further stability to earnings," it said.

CDG will acquire Deane’s Bus Lines Pty Ltd (Fig 5) and Transborder Express (Fig 6), both part of the Deane’s Transit Group (DTG), for a consideration of AUD53m.

The deal is expected to be finalised in September, and the acquisition will be done through CDG’s 51%-owned subsidiary ComfortDelGro Cabcharge. The acquisitions are for DTG’s operations in Queanbeyan (New South Wales) and the Australian Capital Territory (ACT) regions.

"We believe CDG has made an opportunistic investment to make up for a lack of profitability in
the Singapore bus segment. According to a CDG news release, Queanbeyan has experienced strong population growth of over 70% in the last 15 years with expectations of a further 50% in the next decade.
The vast majority of Queanbeyan’s adult population works in Canberra which is expected to translate into strong travel demand for bus services," said MayBank.