Trans-cab Holdings

(13-11-2014, 09:27 PM)r0n Wrote: My understanding regarding the gain on disposal of PPE is that it relates to the disposal of their CNG taxis as they are phasing them out currently. Not sure whether adjusting for such gains on disposal is useful as fleet renewal is part and parcel of their business.

As for the IPO price of 0.68, the adjusted PE would be somewhere above 20, which is probably higher than ComfortDelGro (~20) but lower than SBST (~39) or SMRT (~30). While they are still in the PE range of the listed companies in the transport industry, it may not be a good buy at IPO prices.

Ya the PPE relates to disposal of taxis. The significant disposal gains, as compared to earnings growth, suggests the taxi residual value need to be revised upward for some taxis.

Currently, the effects on earnings as follows:
1. Transcab had lower earnings before 2011 due to higher depreciation since the residual value is lower and thus more depreciation is charged.
2. These earnings are moved into the current IPO accounts period from 2011 to 2013 giving the impression of 20% growth in earnings per annum, by selling the overly depreciated taxis for a one off gain.
3. If this lower residual estimate for remaining taxis is not corrected, every year Transcab may choose to sell some taxis to make earnings meet expectations of share holders. This is moving earnings from past(over depreciation) to the future(gain on sale).

If we ignore tax effects, to adjust we need the following:
1. pg 282: Transcab's accounting policy is to depreciate taxis over 7 years.
2. Assume the taxis that were sold have reach 7 years of life. Thus the gains need to be divided by 7 years and added back to earnings to adjust for over depreciation of the taxis from 2011 to 2013...... (more on this later in 5)
3. Pg 295: Gains(2011 -23k, 2012 5766k, 2013 13504k). Depreciation to add back = Gains/7 = 2011 -3k, 2012 824k, 2013 1873k.
4. Adjusted earnings = Earnings - One off gains + depreciation to add back = 2011 24,013k; 2012 23,154k; 2013 25,274;
Net profit margin = 2011 15.5%; 2012 13.7%; 2013 14.3%;
1.7% growth in earnings per annum from 2011 to 2013.

5. If the taxis were sold earlier than 7 years, the gains would be divided than something less than 7 and thus have a higher depreciation to add back. Thus the estimate above is an underestimate of the adjustment needed.

(15-11-2014, 08:05 AM)valuebuddies Wrote: I would disagree with you. Firstly depreciation doesn't affect the taxable income. Secondly it's hard to believe that companies would start doing dodgy things for its planed IPO which may or may not happen 5 years later. Moreover auditors would probably won't be convinced if management proposed to change its accounting policies every few years.

But having quickly go through its prospectus, I think 2014 is probably the best year for it to launch IPO, due to its significant amount of "Other Credit" as a result of COE and PARF rebates. For the year 2013 alone, more than 1000 taxis were scrapped, which is more than 20% of its fleets as of the date of prospectus. From 2012 to HY2014, it was near 2000 taxi scrapped. With this, can we safely assume that almost all of its first batch of old taxis were scrapped, and those are in operations now would probably due for replacement another 3-5 years time? If this is true, then obviously it's "other credit" is not sustainable.

Having said this, I like this defensive stock, will be vested for the sake of hit and run :-)

hi valuebuddies,
Thanks, you are right. I read up my accounting 101 notes again and depreciation is not allowed for tax relief, only capex is. Thanks for correcting my misconception.

As a sceptic, i find it easier to believe things that one believe is hard to believe.
Companies are the pay masters of their auditors and never underestimate how business owners play this game in capital markets. This is a game of sharks and big boys anyways.

I believe your reading of '2014 is the best year for them to launch their IPO' is right, based on the creative ways and imicable timing that Mgt seem to have. I personally believe in the owners having that foresight to strategize and plan. At least, that is what i will do.

Finally, would you be subscribing to this IPO via balloting (eg. ATM) or through the insiders (your private banker)? If it is the former, your hit-run strategy's risk/reward ratio may not be in your favor..

Small player here, I don't have million of cash or portfolio, so will just go press at ATM, hoping for some "good quality" kopi money.

1. personally i feel a new carbon tax should be imposed on transport companies especially disel-running taxis.
disel emit gas known to alter the blood to probably cause blood cancers..

2. transcab is far far away from the leader in term of taxi fleets..

3. demand for taxis should be there not just from retail consumers but also from corporate...when u OT passed 830pm, companies will pay for u the cab fare as well as for booking fee (at least for my case experienced)

4. there are just too much red-lights stops/junction/conjestion on the island, not so nice experience to take cab

just 2 further observations from the prospectus
1) Table 5 on pg 129 shows taxi penetration in selected cities of sg, hk, jakarta, london & tokyo.
was surprised to see '''sg topped the table with a score of 5.3 taxis per 1000 pax.
sg's penetration rate is 2.1 times higher than hk, 2 times higher than london. nonetheless, there has been pesistent public feedback that taxi supply remains inadequate and unable to meet public demand of their services, particularly during peak periods. The higher taxi penetration rate in sg could also be due in part to the fact that motor vehicle ownership in sg is fairly high"...

i can only bet on 2 things - i) either the public transportation planning/network via subways or buses or cycling or walking has been lousy for so many years , ii) pollution rate and thus cancer rate in sg should be much higher in sg than the other cities mentioned

2) pg 141 - teo kiang ang (i lost count) has like around 40 directorships in companies altogether...amazing individul..my salute

This is where one needs to be aware of the taxi industry's threats and opportunities etc.

Right now, the taxi industry is in a sweet spot as LTA/MOT had did a poor job in transportation planning in the past. However, they are rectifying this error of theirs with the vision of building MRT stations within 10-15 minutes walking distance for most HDB flats. This means future competition for taxis will be rather strong post 2020, the first major one will be the completion of DTL Line in 2017. Therefore I expect rising competition, the first to be impacted are the Singapore Citizen drivers of these taxis, once they realize this trade is not as lucrative as before, they will drop out and taxi operators will be saddled with lots of unrented cars.

The second major drawback for taxi rental companies is the opportunity cost for drivers. For taxi drivers to be in this profession, they expect to draw an average of 2k to 3k per month. As the older drivers die out, the younger drivers will expect a 3k intake post expenses [Rmb this ppl do not have the 36% cpf component, if we pro-rate it, they are earning monthly 2,586 or 2,205 (take home)]. One of the main cost component is taxi rental fees from this operators which is approx 2.4k to 3k/month. Taxi flag down fares cannot rise indiscriminately, so revenue is capped. Secondly, our country has purposely strengthened its currency to stem rising imported inflation; the moment we slow down our SGD appreciation ( i believe this is soon as our exports are suffering), gas prices may rise unless oil prices remain below $85 indefinitely. Thus taxi rental companies are incapable of increasing taxi rentals which are now hefty.

One bright spark for the taxi rental companies will be for the Singapore citizens taxi drivers to be more hardworking in utilising their cars. However, this is unlikely to happen unless the govt starts allowing PR/foreign residents, who are more driven, to enter the taxi profession.

I view taxi services in Singapore as a social utility:

i) it is a controlled entrepreneurship (including those who are affected structurally) for those who are responsible enough to put food on the table

ii) it remains a social luxury just a tier below expensive car ownership due to land scarce and over population - government is responsible for this policy

iii) its a utility as it is well regulated and frankly noone owns anything - taxi companies simply owns a right to operate a lease fleet and hirers being licenced to operate a business, both parties in compliance of guidelines

In view of the above, then it should be view as win-win-win:

i) Govt collects revenue from COEs, taxes from taxis on the road and responsible citizens (drivers) get to be get on with life with their business takings. Separately many drivers also have their usage of their cabs for family consumption after plying the roads.

ii) Consumers have a preferred personalised transport mode without going through the pains of car ownership

iii) Efficient taxi companies gets to operate a fleet for the stipulated period of time in compliance with regulations. Of course stakeholders of taxi companies need to be rewarded for their capital invested in the operators to be the preferred social utilities.

Hence, the approach to evaluate Transcab and Comfort Delgro's taxi unit from the investors' perspective is via a simple approach - cashflow to meet capex and shareholders return via dividends. Regulatory concerns are likely to be minimised in view of the social considerations here and a proven model for policy makers that is well-oiled and well.

Vested
IPO Placement
GG

(16-11-2014, 12:35 PM)greengiraffe Wrote: I view taxi services in Singapore as a social utility:

i) it is a controlled entrepreneurship (including those who are affected structurally) for those who are responsible enough to put food on the table

ii) it remains a social luxury just a tier below expensive car ownership due to land scarce and over population - government is responsible for this policy

iii) its a utility as it is well regulated and frankly noone owns anything - taxi companies simply owns a right to operate a lease fleet and hirers being licenced to operate a business, both parties in compliance of guidelines

In view of the above, then it should be view as win-win-win:

i) Govt collects revenue from COEs, taxes from taxis on the road and responsible citizens (drivers) get to be get on with life with their business takings. Separately many drivers also have their usage of their cabs for family consumption after plying the roads.

ii) Consumers have a preferred personalised transport mode without going through the pains of car ownership

iii) Efficient taxi companies gets to operate a fleet for the stipulated period of time in compliance with regulations. Of course stakeholders of taxi companies need to be rewarded for their capital invested in the operators to be the preferred social utilities.

Hence, the approach to evaluate Transcab and Comfort Delgro's taxi unit from the investors' perspective is via a simple approach - cashflow to meet capex and shareholders return via dividends. Regulatory concerns are likely to be minimised in view of the social considerations here and a proven model for policy makers that is well-oiled and well.

Vested
IPO Placement
GG

Is IPO priced satisfactorily, under-priced or over priced?
What is the market sentiment on this IPO?
Am i asking noob questions?
Then it's O. K. don't have to answer.

(16-11-2014, 02:52 PM)Temperament Wrote:

(16-11-2014, 12:35 PM)greengiraffe Wrote: I view taxi services in Singapore as a social utility:

i) it is a controlled entrepreneurship (including those who are affected structurally) for those who are responsible enough to put food on the table

ii) it remains a social luxury just a tier below expensive car ownership due to land scarce and over population - government is responsible for this policy

iii) its a utility as it is well regulated and frankly noone owns anything - taxi companies simply owns a right to operate a lease fleet and hirers being licenced to operate a business, both parties in compliance of guidelines

In view of the above, then it should be view as win-win-win:

i) Govt collects revenue from COEs, taxes from taxis on the road and responsible citizens (drivers) get to be get on with life with their business takings. Separately many drivers also have their usage of their cabs for family consumption after plying the roads.

ii) Consumers have a preferred personalised transport mode without going through the pains of car ownership

iii) Efficient taxi companies gets to operate a fleet for the stipulated period of time in compliance with regulations. Of course stakeholders of taxi companies need to be rewarded for their capital invested in the operators to be the preferred social utilities.

Hence, the approach to evaluate Transcab and Comfort Delgro's taxi unit from the investors' perspective is via a simple approach - cashflow to meet capex and shareholders return via dividends. Regulatory concerns are likely to be minimised in view of the social considerations here and a proven model for policy makers that is well-oiled and well.

Vested
IPO Placement
GG

Is IPO priced satisfactorily, under-priced or over priced?
What is the market sentiment on this IPO?
Am i asking noob questions?
Then it's O. K. don't have to answer.

The initial placement subscription was very very hot... get v little between 0.5% to 1% of indications...

T Linked Eastspring is amongst cornerstone.

Based on proposed dividends for 2H14 and guidance for 15 (60% of net earnings), it appears to have all the making of a defensive stock. On accounting earnings, it is very attractive relative to ComfortDelgro.

However, many buddies have highlighted red flags on historical accounts...

I blur lah but just go with my social utility theme looking to add on should the debut pricing remains attractive...

GG

(16-11-2014, 03:01 PM)greengiraffe Wrote:

(16-11-2014, 02:52 PM)Temperament Wrote:

(16-11-2014, 12:35 PM)greengiraffe Wrote: I view taxi services in Singapore as a social utility:

i) it is a controlled entrepreneurship (including those who are affected structurally) for those who are responsible enough to put food on the table

ii) it remains a social luxury just a tier below expensive car ownership due to land scarce and over population - government is responsible for this policy

iii) its a utility as it is well regulated and frankly noone owns anything - taxi companies simply owns a right to operate a lease fleet and hirers being licenced to operate a business, both parties in compliance of guidelines

In view of the above, then it should be view as win-win-win:

i) Govt collects revenue from COEs, taxes from taxis on the road and responsible citizens (drivers) get to be get on with life with their business takings. Separately many drivers also have their usage of their cabs for family consumption after plying the roads.

ii) Consumers have a preferred personalised transport mode without going through the pains of car ownership

iii) Efficient taxi companies gets to operate a fleet for the stipulated period of time in compliance with regulations. Of course stakeholders of taxi companies need to be rewarded for their capital invested in the operators to be the preferred social utilities.

Hence, the approach to evaluate Transcab and Comfort Delgro's taxi unit from the investors' perspective is via a simple approach - cashflow to meet capex and shareholders return via dividends. Regulatory concerns are likely to be minimised in view of the social considerations here and a proven model for policy makers that is well-oiled and well.

Vested
IPO Placement
GG

Is IPO priced satisfactorily, under-priced or over priced?
What is the market sentiment on this IPO?
Am i asking noob questions?
Then it's O. K. don't have to answer.

The initial placement subscription was very very hot... get v little between 0.5% to 1% of indications...

T Linked Eastspring is amongst cornerstone.

Based on proposed dividends for 2H14 and guidance for 15 (60% of net earnings), it appears to have all the making of a defensive stock. On accounting earnings, it is very attractive relative to ComfortDelgro.

However, many buddies have highlighted red flags on historical accounts...

I blur lah but just go with my social utility theme looking to add on should the debut pricing remains attractive...

GG

Thanks!