Comfort Delgro closed at $1.03, lowest last seen on 18 Mar 2004! (9 Jun 23)

Dear all

Comfort Delgro (“CD”) closed at $1.03 today. Based on Bloomberg, this was the lowest close last seen on 18 Mar 2004. The main reason cited for this recent drop was that Citi has reduced its target price for CD from $1.63 (26 Feb 2023) to $1.32 (2 Jun 2023). Nevertheless, they maintained their buy call.

Is it all doom and gloom? Should we throw in the towel and just give up on CD?

Personally, I find CD interesting at current levels. Before I delve into it, just for record purpose, I have a previous article on CD published on 19 Jan 2023 (click HERE) where we had taken profit.

At $1.03, this looks very interesting. Let’s take a look.


Possible reasons to be bullish

A) Sequential improvement in the coming quarters

Based on the analyst reports which I read, most of them believe that CD should see better quarters ahead, namely from cost recovery from higher indexation of bus fees; increased passenger volumes for both taxis and trains, a reduction in taxi rental rebates in Singapore from 15% to 10% as of Apr 2023 and lower taxi rebates in China.

B) Low valuations; 1.5x standard deviations below its average 5Y P/BV

Based on Bloomberg, CD trades at 0.9x FY22 P/BV, 1.5x standard deviations below its average 5Y P/BV of 1.5x. Based on analysts’ estimates, CD trades at 12.6x FY23F PE and 0.83x FY23F P/BV with a FY23F dividend yield of around 5.7%.

C) Net cash $715m – Highest on record

Based on some of the analyst reports which I have read, CD’s balance sheet has emerged stronger after the pandemic. CD has net cash position amounting to $715m as at 31 Mar 2023 vs $653m as at 31 Dec 2022. This net cash comprises approximately 32% of its entire market capitalisation. According to a report by Philip Securities dated 17 May 2023, CD’s current net cash position is at a record high.

Such strong balance sheet should be able to support its dividends and any acquisitions. Furthermore, generally speaking, in a high interest rate environment, having net cash is better than being in debt.

D) 19-year low closing price since 18 Mar 2004

During the height of the pandemic, CD traded to a low of around $1.30 – 1.31. At that time, the economy and human traffic came to an almost standstill and we were plagued with uncertainties on how the pandemic will pan out. It is difficult to see how its operations can be worse now compared to the pandemic where we were plagued with uncertainties. Furthermore, most analysts believe that the worst is likely over for CD, post its 1QFY23 business update.

E) Total potential upside is around 38% if the consensus is right 

Based on Bloomberg, average analyst target price is $1.36. FY23F estimated div yield is at 5.7%. If the consensus is right, CD presents a total potential return of around 38%. If CD drops more, it may be a matter of time before some analysts upgrade their hold / neutral calls to buy.

Figure 1: Average analyst target price $1.36; total potential upside is around 38%!

Figure 1_Analyst target price for Comfort Delgro 8 Jun 23

Source: Bloomberg 8 Jun 23

F) Partnership with Gojek may be finalised in the near term

Based on a report by Maybank dated 16 May 2023, they cited that CD’s partnership with Gojek to share resources and tackle driver shortages may be finalised by mid-2023. If finalised, it may bode well for CD.

G) Muted expectations – leave room for potential upside surprise

The persistent under performance of CD’s share price may have already worn out the investment community, leading to muted expectations. This may arguably present room for potential upside surprises.


Possible risk factors to be cautious

A) Overseas operations may face headwinds from competition, narrowing margins and forex risks

The often cited business risk factors that CD faces are forex risks; inflationary cost pressures due to higher electricity cost and labour cost; driver shortage and the timing mismatch to pass on the higher costs (public bus services fees see indexation from wage and CPI on an annual basis).

B) Risk of catching a falling knife

Notwithstanding the above potential bullish reasons, it is possible that stocks can always go lower. This is why some market watchers advise against catching a stock which is falling. Catching a stock which is free-falling is especially dangerous for small mid cap stocks. Personally, for large cap stocks, this risk is slightly less as it is usually widely covered by analysts and there should theoretically be fewer blind spots. Nevertheless, I hasten to add that this depends on one’s strategy and risk profile.

Based on my pure personal observation of price action and chart, CD should see good near-term support around $1.00 – 1.02.

Near term supports: $1.02 / 1.00 / 0.99 / 0.975

Near term resistances: $1.05 / 1.09 – 1.11 / 1.13 – 1.14

Chart 1: CD’s strong near-term support should be around 1.00 – 1.02

Chart 1_Comfort Delgro chart as of 8 Jun 23

Source: InvestingNote 8 Jun 23

C) Risk of economy closure should there be another pandemic

In the event that there are lockdowns again, there will be an adverse effect on CD’s business operations.

D) UK operations – constant strikes may affect CD’s UK operations

There is a possibility that the constant strikes in UK may have an effect on CD’s UK operations. Such strikes have extended to the oil and gas sector where more than 1300 offshore workers staged a 48-hour strike over pay (refer to article dated 24 Apr 2023 HERE)

Personally, I do not know whether such strikes will have any material effect on CD’s UK operations. However, at the very least, it does not aid in investor sentiment in CD.

E) AirAsia plans to expand the ride-hailing service to Singapore by June this year

Based on an article in CNA dated 12 Jan 2023 (click HERE), AirAsia through Capital A plans to launch its ride-hailing service to Singapore by June this year. There is a possibility that investors may be worried on the potential competition which is a valid concern. However, I personally feel with the experience of dealing with competition from Grab, CD is likely to be better positioned this time.

At the time of writing this, I have not seen a formal announcement that Capital A has launched its ride-hailing service to Singapore. Nevertheless, a media article dated 6 Jun 2023 (click HERE) cited that Capital A plans to launch a ride-hailing firm in the Philippines soon. In the same article, it was mentioned that Capital A also plans to launch its ride-hailing firm in Indonesia, Philippines, Singapore and Thailand with no dates mentioned.

F) Such large volume sell offs may be a result of a change in positioning by the institutions 

Volume has picked up amid the slide in CD’s share price. On 31 May, 5 & 6 Jun, CD has traded 21.2m shares, 25.4m shares and 21.8m shares respectively. Such large volume transactions may be a result of a change in positioning by the institutions. If this is really the case, we do not know how many shares they are prepared to sell at current 19-year low prices.

G) May have other reasons which caused this fall

There may be reasons known to some people in the market but unknown to me which cause CD’s share price to decline recently.



It is noteworthy that there are risks involved such as the aforementioned risks (e.g. potential competition from Capital A, headwinds facing its overseas operations; inflationary pressures squeezing its margins etc.). Nevertheless, CD at 19-year low price; valuations trading at 1.5x standard deviations below its 5Y average P/BV; net cash and 5.7% FY23F estimated dividend yield, I am comfortable to take some risks in accumulating CD for a trading play.

For a more complete picture, it is advisable to refer to CD’s analyst reports (Click HERE); SGX website (Click HERE) and CD’s corporate website (Click HERE).

Readers have to assess their own % invested, risk profile, investment horizon and make your own informed decisions. Everybody is different hence you need to understand and assess yourself. The above is for general information only. For specific advice catering to your specific situation, do consult your financial advisor or banker for more information


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P.S: I am vested in CD.



Please refer to the disclaimer HERE

6 thoughts on “Comfort Delgro closed at $1.03, lowest last seen on 18 Mar 2004! (9 Jun 23)

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