Analysts are seeing taxi and public transport operator ComfortDelGro (CDG) as a beneficiary to Singapore’s reopening, as mobility gradually trends towards normalisation. With more room to move, the reopening is expected to drive sequential growth for CDG.
This is already underway as CDG recently reported its 1QFY2022 ended March results, which saw PATMI increase by 30.4% y-o-y to $76.7 million, while revenue grew by 3.9% y-o-y to $895.9 million, thanks to higher contribution across most of the group’s business segment, except its taxi segment.
During the period, CDG also noted that public transport ridership is “slowly improving”, while its rail ridership stood at around 65% to 70% of pre-pandemic levels.
See: ComfortDelGro reports 30.4% higher 1QFY2022 PATMI of $76.7 mil
Maybank Securities is upbeat on CDG’s prospects as it keeps its “buy” call with a target price of $1.76.
By segment, public transportation services accounted for 79.5% of the topline in 1QFY2022.
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“While rail ridership, which stands at about 65-70% of pre-Covid level, and other commercial services turnover should continue to improve, we are also mindful of the cost pressures especially with higher electricity bills (40% higher y-o-y). Hence, we are keeping our below-street forecasts after having previously factored in a tighter EBIT margin assumption,” says analyst Eric Ong.
Ong is aware that the group’s taxi segment failed to record y-o-y revenue growth in the recent 1QFY2022, given a smaller fleet size compared to last year, continued rental discounts and one-off fuel rebates of $0.8 million given to drivers in Singapore.
In China, rental waivers were also granted due to the Covid-19 lockdowns, while the UK saw lower revenues after the divestment of the London taxi business in Jun 2021.
See also: Maybank downgrades ComfortDelGro in contrarian call over Addison Lee acquisition worries
On a positive note, anecdotal evidence suggests that higher fares have not dampened commuters’ demand for point-to-point (P2P) trips as Singapore dropped most of its pandemic-era curbs and reopened its economy.
As fuel prices remain elevated, CDG is extending its 15% taxi rental rebate until end-Sept, while the temporary one-cent hike in its distance and waiting time fares will also be extended until end-July. The surcharge for taxi trips starting from Changi Airport will also be raised by $3 from May 19 to June 30 to increase the supply of cabs for passengers there amid a revival in international air travel.
CDG also recently introduced a 4% commission rate on the trip fare, compared to 20% for Grab and Gojek, for all bookings via its mobile app.
“We think this will help to attract more private hire drivers over to its platform, boosting the market share for its taxi business,” says Ong.
On the other hand, DBS Group research is reiterating its “buy” recommendation on CDG with a target price of $1.95.
Apart from noting that the group is a beneficiary of the reopening, lead analyst Woon Bing Yong believes that the public listings of ride hailing companies could pave the way for less intense competition for CDG.
Woon opines: “With Grab listed via a SPAC in the US and GoTo’s listed in Indonesia, CDG’s ride-hailing competitors may be subject to increased scrutiny, which could reduce aggressive competition and improve the economics of renting taxis. In turn, CDG’s rental taxi fleet could reverse its declining trend.”
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While the stock is positioned as a recovery play, Woon also sees it as a sustainability play, as CDG has embarked on multiple initiatives to turn its business segments green. The group has invested in green projects that include the provision of electric vehicle (EV) charging infrastructure and a greening of its bus and taxi fleet, which could potentially pave the way for inclusion in ESG indices.
As at 4.30pm, shares in CDG are trading 1.4% higher at $1.49, giving it a FY2022 price-to-book ratio of 1.1x with a dividend yield of 3.5%, according to DBS’ estimates.
Photo: ComfortDelGro
