ComfortDelGro’s rail woes to ease as Downtown Line 2 operations gather steam

Margins will recover and staff costs will ease.

ComfortDelGro’s rail segment has been struggling with thinning profit margins and rising staff costs in recent quarters. Analysts at RHB believe that CDG’s rail profits will finally get back on track when Downtown Line (DTL) 2 opens in December.

RHB noted that CDG had experienced a similar trend of declining margins and rising manpower costs prior to the opening of DTL1 in the first quarter of 2013.

“We expect ComfortDelGro to experience a similar trend in operating margins once the ridership improves on DTL2. Management believes that DTL should break even by end-2016, when the ridership for the existing DTL1 and DTL2 services reach maturity,” said RHB.

DTL2 is a 16.6km long rail segment that is made up of 12 stations, including three interchange stations. It will begin operations from 27 Dec and would allow direct travel from the north-western parts of Singapore to the CBD and the Marina Bay area.

DTL2 is expected to reduce the travel time between Bukit Panjang and Bugis to 30 minutes from 50 minutes currently.

“We believe that there is a significant potential for a rise in ridership once DTL2 commences operations. This is because the current north-western parts of Singapore are currently not very well connected by rail lines and definitely do not have any direct connectivity to the CBD,” RHB said.