ComfortDelGro - RHB Invest 2020-10-07: Taxi Business To See Gradual Improvement; BUY

COMFORTDELGRO CORPORATION LTD (SGX:C52)

ComfortDelGro - Taxi Business To See Gradual Improvement; BUY

ComfortDelGro (SGX:C52) should benefit from gradual improvements in public transport ridership and increase in its taxi utilisation, as Singapore enters Phase 3 of re-opening the economy.
Continued government support from extensions to the Jobs Support Scheme and Point-to-Point (P2P) Support Package to early 2021 should provide strong cost support for its Singapore operations.
Given expectations of strong profit growth and an improvement in ROE for 2021F, we believe ComfortDelGro's current valuations remain attractive.

Based on last published data for Jul 2020, the average daily number of trips for 1-shift taxis is now at c.75% of the historical average, while the same data for 2-shift taxis is now at c.85% of the historical average. This is expected to improve further, once Phase 3 of Singapore's reopening commences.
The Singapore Government will soon announce details on Phase 3, which will be the "new normal" until a vaccine or treatment is found for COVID-19. It is expected that restrictions put in place during the “circuit breaker’ period will be relaxed further.

A news report suggests that the regulatory framework for the point-to-point transport sector, which is expected to level the playing field between taxi operators and private-hire operators, will kick in by the end of October. Similar to taxi operators, the regulations will require private-hire operators like Grab and Gojek to be licensed, pay licence fees, and abide by vehicle safety measures.
Last month, Land Transport Authority (LTA) announced the alignment of eligibility criteria for taxi driver vocational licences (TDVL) and private-hire car drivers’ vocational licences (PDVL). All new PDVL applicants must be Singaporean citizens aged at least 30 years, with a minimum of one year of driving experience. This could limit the addition of new drivers for private-hire operations.
The private-hire fleet size is already witnessing a decline, with the number of cars declining by 6.6% YTD according to the LTA.

The expected gradual improvement in public transport ridership during 2021 and the stabilisation of ComfortDelGro’s taxi business should support the return of profit growth in 2021F.
Our DCF-derived SGD1.70 Target Price implies 17.7x 2021F P/E, which is slightly higher than ComfortDelGro’s 10-year average of 15.7x. We believe this is fair, amid expectations of more than 150% profit growth in 2021F.
On a P/BV basis, ComfortDelGro Share Price is trading at a historical low of 1.2x, which we believe fails to capture the expected improvement in ROE in 2021F.
See ComfortDelGro Share Price; ComfortDelGro Target Price; ComfortDelGro Analyst Reports; ComfortDelGro Dividend History; ComfortDelGro Announcements; ComfortDelGro Latest News.

Shekhar Jaiswal RHB Securities Research | https://www.rhbinvest.com.sg/ 2020-10-07

SGX Stock Analyst Report BUY MAINTAIN BUY 1.70 UP 1.550