ComfortDelgro to benefit from taxi supply cut

Its Singapore taxi operation is expected to contribute 21% to its 2012 profit.

According to Barclays, LTA decided on 3 Aug that the taxi fleet growth rate will be 2% p.a. from Aug 2012 to Dec 2013, lower than the current run rate of 4%, which it believes is positive to ComfortDelgro's taxi business in Singapore by limiting the supply growth. "We expect its taxi operation in Singapore to contribute 21% of 2012 operating profit."

Here's more from Barclays:

2Q12 results after the market on 13 Aug 2012: We expect the results to disappoint the market, due to slow demand growth and high fuel costs. For full-year 2012, we expect earnings to decline by 1% in 2012 and rebound by 1% in 2013.

We do not find the stock attractive, trading at <4% yield and 15.9x forward P/E, above the historical average of 13.6x and already giving a "defensive premium". Fundamentally, we expect the expansion of the rail network in Singapore to depress the company's earnings growth in 2012-14.