SINGAPORE (May 15): OCBC continues to rate ComfortDelGro (CDG) at “buy” with a lower fair value estimate of $2.88 from $2.95 previously, following the release of the land transport group’s 1Q results on Friday.

(See also: ComfortDelGro 1Q earnings up 12% to $82.5 mil on one-off gain)

In a Monday report, lead analyst Eugene Chua says the 2.4% on-year decline in the group’s revenue, which was mainly eroded by a weaker GBP against SGD, came largely within expectations, while noting how 1Q has historically been the weakest quarter for CDG.

“Looking to FY17, CDG expects revenue for taxi business to be lower while public transport services revenue to be higher. We expect private hire car services to continue to impact taxi business, resulting in shrinking taxi fleet size, translating to lower taxi rental revenue,” says Chua, who highlights that the group’s fleet idle rate of 3.0%-3.5% for the quarter remains well below industry average in a challenging environment.

The research house has cut its FY17-18F PATMI estimates for the group by 3-6% accordingly.

Chua however highlights rail to be the main revenue growth driver ahead for CDG with the opening of Downtown Line (DTL) phase 3 in the second half of 2017, which will be serving the most populated areas in Singapore compared to the first two phases.

OCBC is forecasting the group to benefit from DTL’s breakeven from FY19, given that it will take time to ramp up ridership.

As at 11.51am, shares of CDG are trading 3.35% lower at $2.60.