COMFORTDELGRO CORPORATION LTD
C52.SI
ComfortDelGro - If You Can’t Beat Them, Join Them
- We expect mild positive sentiment from the discussion of a potential collaboration between ComfortDelgro and Uber to support ComfortDelGro’s share price in the short-term.
- However, as details are still scant on the collaboration, we leave our EPS and recommendation intact for now.
- Maintain Hold and target price of S$2.46, still based on DCF valuations (WACC: 7.0%, LTG: 1%).
If you can’t beat them, join them
- ComfortDelGro (CD) has signed an exclusive letter with Uber Technologies (Uber) for exclusive discussions to form a potential strategic alliance among the two taxi operators.
- The collaboration may include
- management of fleet vehicles and
- booking software solutions in Singapore, including CD’s taxis being made available on Uber’s app.
- CD believes that the potential collaboration will strengthen its position as a major mobility service provider in Singapore.
- However, the press release had a caveat that “there is no assurance that such discussions will result in any definitive agreement or transaction or lead to a consummation of the potential strategic alliance.”
Will having CD’s taxis in the Uber app help?
- From CD’s standpoint, we believe that this is a constructive move to stem its taxi fleet idling rate which increased to 5% in 2Q17 vs. 3% in 1Q17. It is also a preemptive move to discourage the departure of drivers for private hire.
- From Uber's standpoint, it would be a move to gain access to a large fleet of vehicles (CD held 59.9% market share of Singapore’s taxi fleet in May 17) without the need for further funding/subsidies. This could also mean that it will need to continue attracting passengers, especially since its reputation may have been affected by the recent defective car scandal.
- We maintain our forecasts and await further updates from the company. The success of this move should be mildly positive.
Maintain Hold and target price of S$2.46
- Pending the success of this collaboration, taxi profit continues to shrink and we keep to our view that the competition landscape is still stiff, as taxis and private cars co-exist in Singapore.
- Upside risks include possible earnings-accretive M&As and higher dividends.
- Downside risks include further deterioration in taxi and public transport profits.
Cezzane SEE
CIMB Research
|
LIM Siew Khee
CIMB Research
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http://research.itradecimb.com/
2017-08-23
CIMB Research
SGX Stock
Analyst Report
2.460
Same
2.460
