RHB Group Research is maintaining its ‘buy’ rating on ComfortDelGro (CDG) as Singapore gradually reopens.
RHB analyst Shekhar Jaiswal believes the reopening of Singapore’s economy over the coming quarters will support higher demand for taxi services as well as public transport. Since June 14, the Land Transport Authority (LTA) has lifted the two-passenger limit for taxis.
“We maintain that CD’s sequential improvement in profit will be sustained over the next 12 months, aided by the aggressive vaccination plan and robust Covid-19 testing, as well as contact-tracing capabilities in Singapore,” he says in a June 21 report.
With the government targeting 75% of the population to be fully vaccinated by October, Jaiswal also views that an earlier-than-expected revival in international travel is possible, which would further boost taxi and public transport demand.
In the meantime, CDG will continue providing support to its taxi drivers with a daily rental waiver of 50% until June 29 and 35% from June 30 until July 29. It will also continue to waive the call levy charges for drives until June 30. “While this could drag taxi earnings for another month, it will ensure that its taxi drivers fare better than the competition from private hire car (PHC) service providers,” Jaiswal points out.
Additionally, he views potential value-unlocking of CDG’s operations in Australia, changes in the Downtown Line’s financial framework, and on-going restructuring as key catalysts for the counter.
For these reasons, he reiterates his rating with an unchanged target price of $2, implying 22 times FY2021 ending December P/E.
As at 10.20am, shares in CDG are trading flat at $1.65.
Photo: ComfortDelGro
