Wolf Money(Comfortdelgro Corporation)

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The below article is for educational purpose only. Kindly refrain from taking any action. It shouldn’t constitute as an investment advice. Please read the disclaimer.

I fired off my first purchase of the tariff-induced crash. I was searching high and low for a bargain, unfortunately, even with the substantial drop in prices for some stocks. I still find their valuation still uncomfortably high given the recessionary outlook. Most companies will be affected by the negative outlook one way or another. 

I have decided to make a conservative purchase of Comfortdelgro(CDG). Below are the pros and cons 

1.) Big drop in oil price will be helpful to mitigate CDG fuel cost. Even though most of the contracts do come with fuel indexing(principles paid). Some legacy tender like the NEL still requires CDG to foot the bill for the electricity. 

2.) Progress in winning bus and rail contracts overseas. The company has been making headway in EU,UK and Australia, winning contract after contract.

3.) Improvement in earnings due to acquisitions. A2B and Addison Lee were acquired last year. The company will enjoyed full contributions from both acquisitions, giving a boost to their earnings this year.

4.) CDG may experience a double digit boost to this year’s profit. I estimate dividend to hit 8.5c per share at 80% payout. The current price comes with a 4.25c dividends. Last year, the net profit was up 17%. They seem to be on the right path of profit recovery, achieving their highest earnings since Covid-19. 

5.) The financial numbers look ok. Low gearing. Cash flow is strong. Potential 6% yield.

6.) None of that tariff nonsense affecting their business.

7.) With the Chinese giving US travel warnings. More Chinese will be touring other parts of the world. The Americans and Canadians will be traveling to neutral countries of the trade wars. Singapore will get a spillover. Gaga concert will also increase demand for taxis in Singapore.

8.) A small chance they maybe included in the STI component stocks since most blue chips are dropping more than CDG. 

Cons

1.) They might have overpaid for some of their recent acquisitions. 

2.) Start-up cost for the Jurong region line.

3.) Taxi competition heating up with entry of Grab Cab.

Summary

CDG is a stable stock with business of running essential public services. They are unlikely to give investors 1x or 2x return. If stability is what you looking for during economic uncertainty. I am investing in the company for cash management purpose, CDG with their strong moat and balance sheet will give most investors a good night rest. If I can achieved a 10% to 15% return I will be happy. More details will be shared during portfolio update at the end of the month. God Bless. 🙏

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Disclaimers 

All investments is highly speculative in nature and involves substantial risk of loss. We encourage our reader to invest very carefully. We also encourage reader to get personal advice from your professional investment advisor and to make independent investigations before acting on information that we publish. Much of our information is derived directly from information published by companies or submitted to governmental agencies on which we believe are reliable but are without our independent verification. Therefore, we cannot assure you that the information is accurate or complete. We do not in any way whatsoever warrant or guarantee the success of any action you take in reliance on our statements. All information provided are for education only. Buyer beware,do you own due diligence


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