Following a counter-market trend move to increase its taxi booking commission rate, plus a move to beef up its presence in Australia, Maybank Securities analyst Eric Ong has kept his "buy" call on ComfortDelGro C52 .
Given higher EBIT of 2-3% seen for this year and next from its taxi businesses, Ong, in his Jan 2 note, has raised his target price to $1.60 from $1.55.
"To our surprise, ComfortDeGro raised its taxi booking commissions by 2ppt to 7% wef 1 Jan 2024 despite competition from peers, while making the existing 10% rental waiver permanent for its drivers," states Ong.
In another recent development, ComfortDeGro announced on Dec 22 that it is acquiring shares it didn't already own in taxi network operator A2B Australia for A$165.1 million, or A$1.45 per share. ComfortDelGro now holds 9.3% in the Australia-listed company.
As described by ComfortDeGro, A2B has over 8,000 vehicles in its national network and is also a major technology and payment solutions provider for the personal transport industry.
A2B runs taxis under brands such as 13cabs and Silver Service, a taxi and booking dispatch platform, MTI, and the Cabcharge payment solution.
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"Management believes the deal is complementary to its Australian business and is in line with the group’s strategy to scale its point-to-point (P2P) mobility business in the country," says Ong.
When completed by the end of the first half of this year, the acquisition will add around 2% to its bottomline on a full-year basis, estimates Ong.
Separately, ComfortDelGro's move to raise taxi booking commissions to 7% from 5%, while making the existing 10% rental waiver permanent for its drivers, is still seen to help generate more revenue that can "more than" the rising cost of maintaining and upgrading technology systems, as well as financial charges for cashless transactions.
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In contrast, other smaller players such as Ryde and Gojek have reduced their commission rates by varying levels.
"We expect its taxi & private hire segment to continue to grow as demand for P2P trips stays firm on recovery of inbound tourism to Singapore, especially from China with the implementation of the 30-day mutual visa-free entry," says Ong.
ComfortDelGro shares, as at 10.00am, changed hands at $1.40. It is at a 52-week high.
