ComfortDelGro taxi bookings grew up to 8% in 2018

Drivers benefited from street hails, which accounted for 60-70% of taxi ridership in 2018.

ComfortDelGro (CDG) could benefit from Singapore’s ride-hailing landscape that has largely stabilised in the absence of aggressive price undercutting and drivers’ incentives from Grab or Go-JEK, said CGS-CIMB analyst Colin Tan in a note.

Street hails on roadsides and taxi-stands accounted for about 60-70% of CDG’s taxi ridership in Singapore in FY2018, according to management. Taxi bookings also enjoyed robust growth of 7-8% YoY in FY2018.

“We think that in general, CDG’s taxi drivers are still able to get more rides (from street hails in addition to app bookings) than Grab or Go-JEK drivers and thus, potentially have better earnings than private hire-car drivers,” Tan said.

According to Tan, ever since Go-JEK cut its cash incentives in January 2019, its peak-hour fares have risen from about $20 on average in Jan (based on 10.4km mileage) to $22-24, matching closer to Grab’s rates during peak hours. “Whilst this could bring about better gross fare earnings for Go-JEK drivers, it could also slow down or deter new users from joining its ride-hailing platform, in our view,” he said.

Additionally, newer taxi hybrid models could fetch daily rental rates of around $120 vs. $80-90 per day for some older diesel models. “Replacing older models without a net expansion in the fleet could still lead to better taxi earnings for CDG, in our view,” the analyst added.

Citing Land Transport Authority (LTA) data, CGS-CIMB computes that about 930 or 5% of the taxis in Singapore are aged six to eight years, assuming only older taxi models aged six years and above were scrapped in the past few years.

“Given that CDG commands about 60% share of Singapore’s taxi fleet as of December 2018, we think its orders for 600 new hybrid models, which it expects to take delivery of in the next few months, could replace almost, if not all of its taxis that are already aged six years and above (note that the statutory lifespan of taxis in Singapore is eight years),” Tan said.

CDG’s purchasing costs for taxis would also fall, based on the downtrend for prevailing quota premium (PQP) for Category A certificates of entitlement (COE).

As a result, FY2019F earnings contribution from CDG’s public transport services in Singapore is expected to grow on the back of its 4.3% fare hike adjustment effective December 2018, and growing rail ridership across all three of its rail lines.