+ Taxi profits doubled. 2Q23 margins improved with higher booking volumes, additional booking commissions, lower rebates in Singapore (15% to 10% from Apr23) and reduced taxi rebates and costs in China. Another driver to earnings has been a stable taxi fleet in Singapore. Comfort’s taxi fleet grew 0.8% YoY to 8,782, after several years of decline.
+ Cash piling up and returning to shareholders. Comfort continues to generate healthy free-cash-flows (FCF). 1H23 FCF was S$86.4mn (1H22: S$88.5mn), pilling up the net cash to S$565mn. Capital expenditure is now trending at S$350mn p.a. compared to pre-pandemic S$450-500mn. Comfort has raised its minimum dividend payout ratio from 50% to 70%. We estimate S$131mn of dividends to be paid out this year.
– Lethargic in margins for public transport. Public transport operating margin has been the weakest spot for Comfort. 2Q23 margins was 4%, an improvement over 3.4% in 1Q23 but far below pre-pandemic 8%. Bus operations across the UK, Australia and Singapore are depressing margins. The worst hit is the UK which reported an operating loss of S$0.5mn. A combination of irrational tendering activity and a spike in bus driver fees has negatively impacted margins. Australia is suffering from higher overtime salaries and other “running time” charges due to the lack of bus drivers.