Aggressive marketing by GrabTaxi
- New entrant GrabTaxi aggressively marketed GrabCar, its Uber-like private transport service, over the weekend.
- Ongoing revolution in industry could pressurise taxi rentals for traditional players. Market could be under-estimating threat.
- ComfortDelGro (SELL, TP SGD2.70) could be most affected. Not a material share price driver for SMRT (HOLD, TP SGD1.57). Remain NEUTRAL on sector for lack of catalysts.
GrabCar offered free rides over weekend
- GrabTaxi aggressively marketed its GrabCar service over the weekend, offering free rides under GrabCar (Economy) as a “wedding gift” from its founder and CEO, Anthony Tan and his new bride. This is an Uber-like private transport service.
- Recall that privately-held GrabTaxi has started collaborating with the vehicle rental arm of the unlisted Prime Group to lease cars to drivers on its platform.
- According to The Straits Times, GrabTaxi aims to have a fleet of 600 cars by end-2015 and 2,000 in the longer term (note).
Market under-estimating threat; CD could be most hit
- We believe that the ongoing revolution in the taxi industry could pressurise taxi rental rates for traditional taxi companies and allow new entrants to tap the pool of rental cars in the market.
- We believe investors may be under-estimating this threat.
- There are currently 20,838 rental cars in the market that new players could potentially harness. This is a credible fleet size vs the 28,792 taxis currently on the road.
- We believe ComfortDelGro could be most affected by the competition as its taxi business accounts for 31% of its sales and 34% of EBIT (Complacency in this rally, 22 Jun 2015).
- On the other hand, as taxi operations account for a much smaller part of SMRT’s business, we doubt that it would be hurt much.
(Derrick Heng, CFA)
Source: http://www.maybank-ke.com.sg/
