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Relief for ComfortDelGro once Phase 3 begins: RHB

Jovi Ho
Jovi Ho10/7/2020 11:01 AM GMT+08  • 3 min read
Relief for ComfortDelGro once Phase 3 begins: RHB
The average daily number of trips for 1-shift taxis is now at approximately 75% of the historical average.
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The taxi business here will see gradual improvement once Phase 3 of Singapore’s re-opening begins, says RHB analyst Shekhar Jaiswal in an Oct 7 note. Jaiswal is maintaining his “buy” call on the transport operator, with a target price of $1.70.

“ComfortDelGro 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 current valuations remain attractive,” writes Jaiswal.

See: ComfortDelGro sinks into the red with $6 mil loss, skips interim dividend

Based on last published data for July, the average daily number of trips for 1-shift taxis is now at approximately 75% of the historical average, while the same data for 2-shift taxis is now at approximately 85% of the historical average.

Jaiswal expects this 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.

Jaiswal also highlights the upcoming regulatory framework for the point-to-point transport sector, which 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.

See also: ComfortDelGro facing slow recovery after 'catastrophic' 1H20: analysts

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.

Earlier this year, the transport operator reported a 2Q20 net loss of $42 million, bringing 1H20 into a net loss position of $6 million. Revenue in the same period was down 20.8% y-o-y to $1.53 billion, as ridership fell due to the circuit breaker measures.

The results, released on August 14, were deemed “catastrophic” by chairman Lim Jit Poh. Lim added that if not for the government subsidies, the company would have been $66.1 million in the red instead of just the $6 million it posted.

As at 10.49am, shares in ComfortDelGro are trading at 1 cent higher, or 0.69% up, at $1.45.

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