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Here's why the new bus contracting model will keep ComfortDelGro happy this year
It will enjoy a higher EBIT margin of 7%.
This year marks the first full year implementation of the new bus contracting model and surely, ComfortDelGro's bus business will reap the benefits of the new model.
According to CIMB, with its cost-indexed feature and asset-light nature, it could spur a higher operating margin for the group.
"With the completed transition of the Singapore bus sector to the GCM, we are projecting a 7% EBIT margin for ComfortDelGro’s Singapore bus from FY17 onwards, higher than the business’s 4.4% margin in FY16," the research firm said.
However, the group's Singapore bus revenue is foreseen to decrease by 3% to $774m this year and another 7.2% to $718m in 2018 if the loss of certain public bus routes post transition to the GCM is taken into account.
"All above taken into account, we project the group’s FY17F and FY18F Singapore public bus EBIT to be $54m and $50m, respectively, vs. $35m in FY16F," CIMB said.
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