Check out why ComfortDelgro will struggle amid ballooning train ridership

Rail ridership grew 8% while bus transportation rose by only 4%.

According to Barclays Research, SBS Transit, a 75%-owned subsidiary of ComfortDelgro, released its Singapore bus and rail ridership numbers for August after the market close on 21 Aug.

Here's more from Barclays:

We are concerned that the expanding urban rail network in Singapore will depress the growth of road traffic as a result of commuters migrating to the urban rails. This would work against ComfortDelgro's earnings profile, as the company expects 49% of its FY12E operating profit to be from road-related segments in Singapore, including buses, taxis, automotive engineering, vehicle inspection & testing, driving school and car rental & leasing, vs only 8% to come from the rails.

SBS's bus ridership grew by 4% y/y in 8M12, tracking ahead of our full-FY12E forecast of -2% y/y. We expect the bus operation in Singapore to contribute 7% of the company's operating profit for FY12E.

SBS's rail ridership grew +8% y/y in 8M12, tracking ahead of our full-year forecast of +5% y/y for FY12E. We expect the rail operation to contribute 8% of the company's operating profit for FY12E.

We believe ComfortDelgro, with its very diversified earnings sources, has the most defensive earnings profile among the ground transport companies. However, the shares are trading at the highest forward P/E multiples in the sector and offer only a 3.5% current yield based on a 50% payout ratio.

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