ComfortDelGro weathers market shake-up as Go-Jek threat fades

The lowering of incentives at Go-Jek narrows the earnings divide between private hire and taxis.

The prevailing market expectation that ComfortDelgro will lose drivers to ride hailing firm Go-Jek were 'overblown', according to UOB Kay Hian, as the transport operator offers sufficiently attractive compensation and incentive packages to retain its drivers.

In an earlier report, Go-Jek drivers have lamented that the incentive cuts made it harder for them to move to the next tier.

“Passenger fare incentives that spurred greater ridership of private hires over taxis have also been relatively absent compared to the Grab-Uber days,” analyst Foo Zhiwei said in a report.

Go-Jek earlier cut its driver incentives from $25-210 to $10-210 after the Indonesian ride-hailing firm burned through $300m in incentives, according to a report from CGS-CIMB.

“A recent commentary showed that on a per hour basis, taxi drivers are probably better off, in line with our interactions with drivers. Passenger fare incentives that spurred greater ridership of private hires over taxis have also been relatively absent compared to the Grab-Uber days,” Foo explained.

Zhiwei added that tighter regulations that entail that ride-hailing apps are now subject to the same oversight as taxi operators also bode well for CDG.

“With the business environment souring for ride-hailing, the threat to well-established incumbents like CDG is fading,” UOBKH said.

Also read: ComfortDelgro takes a breather as LTA tightens regulations for ride-hailing firms

The research firm believes that CDG’s rise in earnings is likely to be buoyed by the public transport segment where the firm injected several acquisitions in 2018. The report noted that CDG is expected to report a Q4 2018 core net profit of $78m on revenue of $994m. 

“The coming quarters will provide more clarity, as earnings contributions in 2018 were likely marred by integration and acquisition costs,” UOBKH explained.