Public Transportation - CIMB Research 2016-04-12: LTA’s new regulations for private hire cars

Public Transportation - CIMB Research 2016-04-12: LTA’s new regulations for private hire cars COMFORTDELGRO CORPORATION LTD C52.SI  SMRT CORPORATION LTD S53.SI 

Public Transportation - LTA’s new regulations for private hire cars 

  • The LTA’s planned incorporation of a new regulatory framework for the private ride industry (Uber/Grab) should be slightly net positive for traditional taxi operators. 
  • Likely by 1H17, private hire car drivers would be required to obtain a PDVL. 
  • To better level the playing field, the authority should look into the disparities in driver and vehicle age requirements for taxi and private hire car services, in our view. 

Posting new regulations for private hire car drivers and vehicles 

  • The Land Transport Authority (LTA) has announced that, likely by 1H17, drivers who wish to provide private ride services (UberX/GrabCar drivers) would have to obtain a Private Hire Car Driver Vocation Licence (PDVL). 
  • Key criteria that a PDVL applicant must meet include 
    1. being a Singaporean citizen holding a Class 3/3A driving licence for at least two years; 
    2. passing a medical checkup and background screening and 
    3. completing a 10-hour-long PDVL course and passing the requisite tests. 
  • PDVL holders will also be subject to a demerit point system; PDVL holders who are active drivers and have no demerit points will be exempt from the refresher course every six years. 

Reducing unnecessary training for obtaining a taxi licence 

  • The LTA has also taken steps to reduce the unnecessary training for Taxi Driver Vocational Licence (TDVL) applicants. 
  • From May 16, training for route planning will no longer be limited to the traditional hardcopy street directory, but also include smart navigational tools like Global Positioning Systems (GPS). This would reduce the course’s total training hours from 60 hours currently to only 25 hours. 

The changes should be slightly net positive for taxi operators 

  • We believe the regulatory changes will have a slightly net positive impact on traditional taxi operators as 
    1. the shortened training hours for getting a TDVL could reduce the disadvantage of taxi operators against Uber/Grab in attracting drivers and 
    2. the planned regulations for the private ride service industry are light enough - the policies’ limited impact on Uber/Grab’s potential driver pool should not corner them into upscaling the competition against taxi operators in recruiting drivers. 

Remaining issues that need to be addressed 

  • While the authority is moving in the right direction, we note that there are still disparities that it should work on to level the playing field for operators. 
  • In our view, two key issues that have led to a disadvantage for traditional taxi operators include: 
    • Driver age requirement - TDVL requires that applicants must be at least 30 years old while there is no such age requirement by PDVL. The disparity has led to a smaller potential driver pool for taxi operators than Uber/Grab. 
    • Vehicle age requirement - the LTA’s current regulations mandate that vehicles for taxi use must be scrapped after eight years of service; however, many Uber/Grab drivers are operating on 9-10 year-old rented cars. This has put taxi operators at a disadvantage in terms of cost. 
  • We think the authority should remove the driver age requirement for TDVL while tightening the vehicle age requirement on vehicles for Uber/Grab; such policies should help to level the playing field for operators while protecting commuters’ interests. 

Maintain Overweight rating, with CDG as our top pick 

  • We think the threat of Uber/Grab has been overhyped (see our 9 Feb 16 note Kicking the tires - Taxis vs. Uber/Grab for more details). CDG is our sector top pick (Add, TP: S$3.27). 
  • Key re-rating catalysts for CDG include Singapore’s ongoing bus reform and earnings growth from the DTL. SMRT (REDUCE, TP S$1.40) remains a Reduce as it faces strong near-term headwinds from the authority’s fare cuts, ridership diversion to the Downtown Line (DTL) and rising rail maintenance expenses. 




Roy CHEN CIMB Securities | William TNG CFA CIMB Securities | http://research.itradecimb.com/ 2016-04-12
CIMB Securities SGX Stock Analyst Report ADD Maintain ADD 3.27 Same 3.27
REDUCE Maintain REDUCE 1.40 same 1.40


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