SINGAPORE (May 28): CGS-CIMB Research is maintaining its “hold” call on ComfortDelGro with an unchanged target price of $2.37 after announcing it was parting ways with Lion City Rental (LCR), Uber’s wholly-owned car rental subsidiary, in Singapore.
This comes after ComfortDelGro last week said it would no longer be acquiring a 51% stake in Lion City Holdings, the operator of LCR, following Uber’s exit from the Southeast Asian market after its acquisition by its rival, Grab.
See: ComfortDelGro and Uber part ways; Lion City acquisition terminated
See: Grab confirms acquisition of Uber's Southeast Asia operations; Uber CEO Khosrowshahi to join Grab's board
In a report last Friday, analyst Cezzane See is maintaining her forecasts as she previously did not incorporate any earnings from the proposed tie-up with LCR. ComfortDelGro’s withdrawal from the acquisition deal comes as no surprise to CGS-CIMB, she adds.
“When the Grab/Uber acquisition emerged in March 18, we theorised that there was a high likelihood that the proposed deal between ComfortDelGro and Uber would be renegotiated (positive if pricing for LCR could be negotiated lower) or shelved (mildly negative as it would result in CD’s taxi business being status-quo especially if private-hire competition picks up again),” explains See.
“We believe ComfortDelGro made the move [to acquire LCR] largely to tap on Uber’s private-hire client network and ride-hailing technology, but without that, the tie-up was rendered less attractive, in our view.”
Citing local news reports which recently quoted unnamed sources as saying that ComfortDelGro and Go-Jek are in talks for a tie-up, See emphasises that these reports remain unsubstantiated and that it is currently too premature to conclude on any possible partnership between the two.
See: ComfortDelGro said to be in talks with Indonesia's Go-Jek to explore partnership
“In our view, Go-Jek’s passive management style could appear to be attractive to ComfortDelGro,” comments the analyst nonetheless.
As at 11:06am, shares in ComfortDelGro are trading 2 cents higher at $2.43 or 1.95 times FY18F book.
