DBS Group Research analysts Yong Woon Bin and Paul Yong have reiterated their “buy” call and $1.95 target price on ComfortDelGro, citing a possible reversal in its taxi business due to “less intense competition”.
“ComfortDelGro’s ride-hailing competitors may be subject to increased scrutiny, which could reduce aggressive competition and improve the economics of renting taxis. In turn, ComfortDelGro’s rental taxi fleet could reverse its declining trend,” write the analysts in their April 11 note.
They are referring to Grab Holding and GoTo, which face closer scrutiny from a bigger pool of investors now that they are public companies.
In the meantime, ComfortDelGro is a “major reopening beneficiary” as traffic resumes, not just in Singapore but also in its other key markets UK and Australia, which are also moving towards living with the virus.
The analysts are already observing that mobility tends in Singapore have started to normalise. As such, they expect the company’s earnings for FY2022 ending Dec 2022 to rise 26% y-o-y with increased ridership.
The DBS analysts also point out that ComfortDelGro has put in place several ESG-related initiatives, such as providing EV charging infrastructure, and a “greening” of its bus and taxi fleet. This could pave the way for the company to be included in ESG indices and therefore become more visible to investors and become a required holding of funds tracking these indices.
See also: Test debug host entity
Yong and Yong’s target price of $1.95 is based on a sum-of-the-parts valuation that includes DBS’ price targets on ComfortDelGro’s separately listed subsidiaries SBS Transit and Viacom, plus, a 6.5x EV/Ebitda valuation on its remaining businesses, including its unit in Australia, which was meant to go for an IPO but put on hold for now.
As at 11.10am, ComfortDelGro shares traded at $1.47, unchanged thus far today, and up 5.76% year to date.
