SINGAPORE (Feb2): OCBC Investment Research is maintaining its “hold” call on ComfortDelGro Corporation (CDG) while raising its fair value to $2.02 from $2.05 previously on higher FY18-21 earnings by 1-3% to factor in petrol sales assumptions to offset declining diesel sales.
In a Friday flash note, analyst Eugene Chua says he deems the stock fairly valued based on its last closing price of $2.15, supported by a FY18F dividend yield of about 4.9%.
In his view, while CDG’s recently announced tie-up with Uber is not expected to be spectacular, he does believe it will help stabilise CDG’s taxi operations, particularly with regards to its fleet idle rate.
See: ComfortDelGro and Uber launch UberFLASH services in Singapore
Chua also highlights latest media reports of CDG scaling up its petrol station business to serve its growing fleet of hybrid taxis, which he believes makes sense given the recent change in the group’s fleet profile.
“However we do not think this will provide much lift to its earnings, at least not until CDG’s petrol station starts to serve the larger private hire car fleet of Uber, post-approval of the CDG-Uber alliance. We believe the latter has potential to more than offset the declining diesel sales,” he adds.
In particular, the analyst advises investors against speculating on the latest market rumours of Grab acquiring Uber’s Southeast Asia business, given the lack of concrete details.
Chua nonetheless notes that the deal, if it were to happen, would make Grab the only ride-hailing service provider in Singapore – subsequently granting the group a monopolistic position that would also allow it to have control in raising car rental rates, reduce subsidies, and change fare structure to improve profitability, all of which would be beneficial to CDG.
Shares in CDG are trading flat at $2.15 as at 4.15pm.
In our latest issue of The Edge Singapore (Issue 816, Week of Feb 5), we speak to cabbies and commuters alike on their views of dynamic pricing models and ride-hailing platforms, and how these have prompted a shift in incentives and rules.
Get your copy at all major newsstands and bookstores today, or:
