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


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.

Phase 3 of Singapore re-opening to support further improvement in taxi business.

  • 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.

Regulations to be rationalise taxi competition.

  • 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.

ComfortDelGro's valuations remain compelling.

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