In his April 6 report, Jaiswal expects CDG to have strong operating metrics in the second half of 2023, due to strong increase in ridership with higher tourist arrivals.

This confidence in the land transport company’s increase in demand is further supported by a recent survey by The Straits Times, which shows that despite the wide adoption of ride-hailing services, hiring taxis by way of street hailing were the cheapest way for a point-to-point ride.

“Given the group’s market leadership in Singapore’s taxi industry, its drivers should see benefits from the increased demand for taxi and private-hire car rides,” he says.

The analyst also sees CDG’s efforts to electrify its business as a plus.

In a recent article by The Straits Times, CDG’s outgoing chairman Lim Jit Poh suggested that the group will spend $6 billion to replace the bulk of its fleet of buses and taxis with electric vehicles (EVs).

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It rolled out 100 BYD e6 electric taxis in 2022, and has plans to have up to 1,000 of these vehicles by 2024. The group also operated 56 diesel hybrid/electric buses under its Singapore public bus businesses, as at the end of 2022.

In its latest tender, the group is looking to secure 500 new petrol-electric hybrid taxis that are expected to be delivered from November 2023, with the option for another 500 hybrid taxis with deliveries no later than October 2025.

The total of 1,000 hybrid taxis will account for [around] 11% of its fleet size.

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CDG has also started operating electric shuttle bus services for the National University of Singapore and the Nanyang Technological University of Singapore, since 2022.

It is Singapore’s largest electric private bus operator, with 54 private electric buses running under its name.

CDG’s driving centre has also added five electric cars to its training fleet, and will grow the electric car training fleet to 100 by 2030.

In September 2021, CD ENGIE, one of Singapore's largest EV charging operators owned by CDG, won the pilot tender to install and deploy 479 charging points at public car parks. This was followed by a second tender win in November 2022 to install up to 4,509 charging points at 387 HDB car parks.

Jaiswal says that the target price is derived from discounted cash flow (DCF), where key drivers include more earning-accretive acquisition, higher dividend payouts, fare increases boosting CDG’s train businesses, and favourable regulations supporting the taxi industry.

However, he also mentions some key risks, including loss of existing contracts for the public transport business, continuing decline in taxi fleet size, increased competition from ride-hailing players, and sharper-than-estimated decline in margins for existing businesses.

As at 3.50pm, shares in CDG are trading 1 cent lower or 0.83% down at $1.19.

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