SINGAPORE (Mar 27): CIMB expects ComfortDelGro to stay unexciting in the near term given the many uncertainties surrounding the latest developments in Singapore’s ride-hailing sector.
"We maintain our 'hold' call and DCF-based target price of $2.16, pending further information on the proposed ComfortDelGro-Uber deal," says lead analyst Cezzane See in a Tuesday report.
On Monday, Grab announced that it will take over Uber Technologies’ operations and assets in Southeast Asia by integrating Uber’s ridesharing and food delivery businesses into Grab’s existing multimodal transportation and fintech platform. Grab stated it would submit the relevant merger notification to the Competition Commission of Singapore.
See: Grab confirms acquisition of Uber's Southeast Asia operations; Uber CEO Khosrowshahi to join Grab's board
Grab guided that the migration of Uber drivers and riders, as well as Uber Eats’ customers, merchant partners and delivery partners to the Grab platform will occur promptly. The Uber app will continue to operate for two weeks; while Uber’s delivery and restaurant partners will be ported to the GrabFood platform from May.
Last Dec, ComfortDelGro announced that it was tying up with Uber and proposed a deal for the acquisition of 51% of Lion City Rental (LCR) for $642 million.
See: ComfortDelGro and Uber finally join forces
Given the latest developments, See says it is very likely the proposed deal between ComfortDelGro and Uber could be renegotiated, with the following scenarios likely to emerge.
• ComfortDelGro renegotiates its terms and continues to partner LCR with Grab: This would be a positive as it would help to protect its interests while enabling it to enter the private-hire space.
• ComfortDelGro does not partner with LCR with taxi business maintaining its status quo: This could be negative if competition from rival Grab remains unabated post-merger.
See says there is no certainty Grab will take over LCR's fleet as it already has its own assets plus access to third-party vehicles via existing partnerships.
With regulators still unable to conclude if the Uber-ComfortDelGro undermines competition after two months of deliberations, only one thing is for certain: The Grab-Under merger deal is set for a long-drawn period of review, says See.
As at 3.44pm, shares in ComfortDelGro are down 2 cents at $2.02 or 15.5 times FY18 earnings.
