SINGAPORE (Jan 19): CIMB is maintaining its “hold” call on ComfortDelGro (CD) with a target price of $2.15.
This came on the back of the group announcing on Thursday that it is kickstarting its collaboration with ride-hailing app Uber.
The two companies have launched UberFLASH in Singapore, a service that matches riders with the nearest CD taxi or an uberX vehicle.
See: ComfortDelGro and Uber launch UberFLASH services in Singapore
This service however is similar to JustGrab, from competitor Grab, which was launched earlier in March 2017.
However, there are minor differences in terms of pricing points between the two competitors. UberFLASH’s base fare is slightly higher at $3.00, compared to JustGrab’s $2.50, but its fare/km is slightly lower at 45 cents, as compared to JustGrab’s 50 cents.
UberFLASH’s pricing will also include dynamic pricing.
In addition, UberFLASH’s base fare and fare/km are lower than the current CD taxi base fare of $3.20 to $3.90 and fare/km of 55 cents to 63 cents.
In a Thursday report, analyst Cezzane See says, “Hence, taxi drivers could relegate to it during peak timings to reap the benefits of surge pricing.”
The analyst believes that this service might not propel the taxi fleet back to growth mode, as the personal mobility segment in Singapore has remained competitive with the ration of rental cars to taxis rising significantly.
“But it should broaden CD’s taxi drivers’ avenue for bookings, potentially leading to lower taxi idling rate which stood at about 5% in 9M17, and in turn lower driver attrition, in our view,” says See.
On the other hand, CD has previously proposed to acquire a 51% stake in Uber’s rental car unit Lion City Rental (LCR).
See: ComfortDelGro and Uber finally join forces
In the analyst’s view, this deal marks CD’s move into the private-hire space and could also breathe life into its Automotive Engineering Services (AES).
As at 11.35am, shares in ComfortDelGro are trading 7 cents or 3.48% higher at $2.08. The stock is trading at 15.4 times FY18 core earnings with a dividend yield of 4.9%.
