ComfortDelgro has seen its overseas expansion gain traction after securing new contracts worth GBP422m (SGD720m), to run four public bus packages in the UK for five years. Earlier, the group also announced that an overwhelming 97.3% of A2B shareholders voted in favour of its proposed acquisition of A2B – a leading supplier of personal transportation services & solutions in Australia.
Maybank IB is raising its FY24-26E EPS by 2-4% to account for these positive developments. The house maintains a BUY call with an unchanged DCF-based TP of SGD1.60 (8.3% WACC and 0.5% LTG).
Wins contracts to operate bus services in Manchester
Wholly-owned subsidiary Metroline won contracts to operate four public bus franchises from the Greater Manchester Combined Authority (GMCA). This latest award under Transport for Greater Manchester’s (TfGM) Tranche 3 tender process will see Metroline operate bus services for the Hyde Road, Sharston, Tameside and Wythenshawe franchises for five years
commencing 5 Jan 2025 (with options to be extended for two, one-year terms). These packages will comprise a total of 232 different services utilising 420 buses, thus adding twice as many services and a 30% increase over its London portfolio.
Acquires UK-based ground management & specialist
Looking ahead, CD will continue to seek other new bus franchise opportunities in the Northwest and across the UK. In Feb this year, it also expanded into adjacent businesses with the acquisition of UK-based CMAC Group for GBP80.2m. CMAC is a ground transport management & accommodation network specialist that handles travel disruptions for c.3m travellers annually. As a key player in providing wide-ranging emergency passenger transport services to businesses, CMAC is complementary to CD’s operations in the UK/Europe, and expands its B2B offerings in the region.
Accretive M&As to drive earnings growth
Notably, revenues from CMAC Group in the UK started to contribute from mid-Feb 2024 after completion of the deal on 13 Feb 2024. As for A2B, the house said it understands that orders approving the Scheme were sought from the NSW
Supreme Court on 28 Mar 2024. Pending the satisfaction or waiver (as applicable) of all conditions, the transaction is expected to be completed in Apr 2024. Maybank IB management sees A2B as an excellent strategic fit that will allow CD to grow its point-to-point offering and deepen the group’s presence in the Australian market as a multi-modal mobility operator.
