Comfort Delgro

Hi Ray,

The above profits are not for FY 17, but what I think will be the true FY profits for each division over the next 3-5 years.

Why have I guided for a 50mil Profit for the taxi Division? This is because prior to 2017, Comfort was renting its taxis out in the region of 109, however, Uber/Grab's competition forced comfort to reduce rentals this year. This happened in Feb/Mar of this year.

On the private rental market, car rentals are going for much lower at 40-65+ after subsidies. If you compare CDG's 1HFY17 revenue vs 1HFY16 revenue, there was only a slight decline of 8% (55mil) and along with it a 13 mil decline in profits.

Hence if Comfort is really forced to reduce rentals to say in the region of 70 per day, we can expect a fall in revenue from 673.9mil (109+ rental rate) to maybe 432mil (70 range). Such a fall means on a half year basis, profit falls from 85.1mil to 25-30 mil. I have guided for 25 mil.

From CNA's updates on Grab's woo on Comfort drivers, it can be seen that some Comfort cabbies are still stuck on the old rental rates of $110 and this could be due to them having signed the 24-36 month contract with Comfort to rent their taxis (similar to our handphone plans)

http://www.channelnewsasia.com/news/sing...ro-9184980

CDG has taxi operations in China, UK, Australia, and Vietnam as well. Singapore will not be the only area that will be hit by lower profitability, if the taxi operations in these areas face strong competition from grab/uber as well.

Its operating profit for its taxi businesses globally is $167.5M, or 36% of the total. In an industry that is under the threat of disruption, how much of this amount will be left in 3-5 years time? Will CDG ever be as strong financially as it once was? And therefore, the current p/e of 14 is not cheap to me. I think it may still be early to see the full effects that grab/uber has on CDG.

(17-09-2017, 04:19 PM)CY09 Wrote: Hi Ray,

The above profits are not for FY 17, but what I think will be the true FY profits for each division over the next 3-5 years.

Why have I guided for a 50mil Profit for the taxi Division? This is because prior to 2017, Comfort was renting its taxis out in the region of 109, however, Uber/Grab's competition forced comfort to reduce rentals this year. This happened in Feb/Mar of this year.

On the private rental market, car rentals are going for much lower at 40-65+ after subsidies. If you compare CDG's 1HFY17 revenue vs 1HFY16 revenue, there was only a slight decline of 8% (55mil) and along with it a 13 mil decline in profits.

Hence if Comfort is really forced to reduce rentals to say in the region of 70 per day, we can expect a fall in revenue from 673.9mil (109+ rental rate) to maybe 432mil (70 range). Such a fall means on a half year basis, profit falls from 85.1mil to 25-30 mil. I have guided for 25 mil.

From CNA's updates on Grab's woo on Comfort drivers, it can be seen that some Comfort cabbies are still stuck on the old rental rates of $110 and this could be due to them having signed the 24-36 month contract with Comfort to rent their taxis (similar to our handphone plans)

http://www.channelnewsasia.com/news/sing...ro-9184980

Thanks for your explanation. 
Let's see if 3Q number points toward the trend.
I believe CDG will not sit there to wait for disruption. They will fight back.

My take is that there will lose ~30% profit in Taxi SBU. SBS is doing good, would be able to lessen their pain.

They will fight back. But will that mean cash burning for comfordelgro's taxi division as well?

Weijian linked a good article which stated how Grab/Uber has introduced new demand into the "taxi" business.

However let's look at the supply side in Singapore. In 2014, there were a total of 47.5k taxis and rental cars. In 3 years, this number has almost doubled to 89k taxis and rental cars with Grab and Uber entering the fray. I am skeptical that the additional supply will be met by sufficient additional demand due to new functions and lower prices.

So to Starcraft's question, will there be cash burn? In the short run, CDG's taxi division will be cash flow positive because it is likely CDG will not buy new cars to replenish its fleet but gradually reduce it. Furthermore, there are taxi drivers who are still lock up at high rentals on long term contracts with CDG. However in 3-5 years time, when CDG's fleet start to age and replenishment will be needed, the lower rental rates after contract renewals will coincide with CDG's necessity to do basic CAPEX to replenish its taxt fleet. At this juncture, CDG will need to burn a large amount of cash to buy cars and bid for COE.

If one is to fully analyse CDG henceforth, CDG will need to reveal: 1) the age of its taxi fleet, 2) the rentals and their lock up duration. The analysis of CDG's fleet and its cash flow will mirror closely to that of Rickmers and FSL Trust.

ComfortDelGro shares sink to lowest in nearly 3 ½ years
http://www.todayonline.com/singapore/com...3-12-years


By
Kenneth Cheng
KennethCJW@mediacorp.com.sg
Published: 5:44 PM, September 19, 2017
Updated: 6:46 PM, September 19, 2017

SINGAPORE — ComfortDelGro shares continued on a downward spiral on Tuesday (Sept 19) to hit their lowest in nearly three-and-a-half years, as investors deserted the stock in droves after two blows to the transport operator’s business last week.

ComfortDelGro shares closed at S$2.01 on Tuesday, down 2.9 per cent from the previous session, after sinking to an intraday low of S$1.995. That was the lowest since April 9, 2014, when the shares fell to S$1.98. About 20.6 million shares worth S$41.6 million changed hands on Tuesday, making ComfortDelGro the fourth most actively traded counter by value on the Singapore Exchange.

ComfortDelGro shares have lost more than 18 per cent of their value this year, while the benchmark Straits Times Index has risen about 12 per cent.
Last Friday, the Land Transport Authority announced that SMRT Trains beat SBS Transit — a subsidiary of ComfortDelGro — in the tender to operate and maintain the Thomson-East Coast Line, which will open in stages from 2019.

Earlier that day, TODAY reported that more than 2,000 ComfortDelGro taxi drivers could jump ship and join rival taxi operators partnering ride-hailing firm Grab or switch to become drivers of its private-hire car service. That came less than a fortnight after Grab dangled heavily-discounted rental rates to woo ComfortDelGro cabbies, as part of an offer that will run until Sept 29.

Analysts said the double whammy of bad news hurt investor sentiment over ComfortDelGro, although they added that a positive outcome from the taxi operator’s talks with ride-hailing giant Uber over a potential tie-up could spark a share price rebound.

CMC Markets analyst Margaret Yang said competition was heating up intensely, with ride-hailing firms like Uber and Grab usurping market share from traditional taxi operators. She added, however, that investors should wait for ComfortDelGro’s upcoming release of third-quarter earnings as well as news on the potential ComfortDelGro-Uber tie-up, before making their next move.

In an announcement filed with the Singapore Exchange last month, ComfortDelGro, which had nearly 15,500 cabs under its Comfort and CityCab brands as of July, said the exclusive talks with Uber include making its fleet available on Uber’s app. The potential collaboration could include teaming up on fleet management and booking software solutions, although the company added that there was “no certainty or assurance” the talks would result in an agreement or an alliance materialising.

Any “major news” from these discussions could be a catalyst for a rebound in its stock price, said Ms Yang.  DBS Group Research analyst Andy Sim also said that positive developments from a tie-up could help lift ComfortDelGro shares.

Ms Yang said that since the two ride-hailing firms set up shop in Singapore, traditional taxi operators have been threatened. With deep pockets, the ride-hailing companies have been able to dish out incentives to lure passengers. The prospect of ComfortDelGro losing a sizeable number of drivers as part of the on-going Grab recruitment drive was also “quite bad”, she noted.

Mr Sim said the news from the recruitment campaign had “definitely weighed on sentiment”, and the market was still concerned over whether the repercussions on its taxi business would materialise.

Under its campaign, Grab is offering a daily S$50 discount for six months on rents for existing ComfortDelGro drivers to join any of Grab’s five partner taxi firms: Trans-Cab, Prime Taxi, SMRT Taxis, Premier and HDT Singapore Taxi. The discounts are higher if drivers switch to a private-hire car via Grab’s rental arm, GrabRentals.


.................................
Not vested. Monitoring.

(19-09-2017, 10:58 PM)Ray168 Wrote: ComfortDelGro shares sink to lowest in nearly 3 ½ years
http://www.todayonline.com/singapore/com...3-12-years


By
Kenneth Cheng
KennethCJW@mediacorp.com.sg
Published: 5:44 PM, September 19, 2017
Updated: 6:46 PM, September 19, 2017

SINGAPORE — ComfortDelGro shares continued on a downward spiral on Tuesday (Sept 19) to hit their lowest in nearly three-and-a-half years, as investors deserted the stock in droves after two blows to the transport operator’s business last week.

ComfortDelGro shares closed at S$2.01 on Tuesday, down 2.9 per cent from the previous session, after sinking to an intraday low of S$1.995. That was the lowest since April 9, 2014, when the shares fell to S$1.98. About 20.6 million shares worth S$41.6 million changed hands on Tuesday, making ComfortDelGro the fourth most actively traded counter by value on the Singapore Exchange.

ComfortDelGro shares have lost more than 18 per cent of their value this year, while the benchmark Straits Times Index has risen about 12 per cent.
Last Friday, the Land Transport Authority announced that SMRT Trains beat SBS Transit — a subsidiary of ComfortDelGro — in the tender to operate and maintain the Thomson-East Coast Line, which will open in stages from 2019.

Earlier that day, TODAY reported that more than 2,000 ComfortDelGro taxi drivers could jump ship and join rival taxi operators partnering ride-hailing firm Grab or switch to become drivers of its private-hire car service. That came less than a fortnight after Grab dangled heavily-discounted rental rates to woo ComfortDelGro cabbies, as part of an offer that will run until Sept 29.

Analysts said the double whammy of bad news hurt investor sentiment over ComfortDelGro, although they added that a positive outcome from the taxi operator’s talks with ride-hailing giant Uber over a potential tie-up could spark a share price rebound.

CMC Markets analyst Margaret Yang said competition was heating up intensely, with ride-hailing firms like Uber and Grab usurping market share from traditional taxi operators. She added, however, that investors should wait for ComfortDelGro’s upcoming release of third-quarter earnings as well as news on the potential ComfortDelGro-Uber tie-up, before making their next move.

In an announcement filed with the Singapore Exchange last month, ComfortDelGro, which had nearly 15,500 cabs under its Comfort and CityCab brands as of July, said the exclusive talks with Uber include making its fleet available on Uber’s app. The potential collaboration could include teaming up on fleet management and booking software solutions, although the company added that there was “no certainty or assurance” the talks would result in an agreement or an alliance materialising.

Any “major news” from these discussions could be a catalyst for a rebound in its stock price, said Ms Yang.  DBS Group Research analyst Andy Sim also said that positive developments from a tie-up could help lift ComfortDelGro shares.

Ms Yang said that since the two ride-hailing firms set up shop in Singapore, traditional taxi operators have been threatened. With deep pockets, the ride-hailing companies have been able to dish out incentives to lure passengers. The prospect of ComfortDelGro losing a sizeable number of drivers as part of the on-going Grab recruitment drive was also “quite bad”, she noted.

Mr Sim said the news from the recruitment campaign had “definitely weighed on sentiment”, and the market was still concerned over whether the repercussions on its taxi business would materialise.

Under its campaign, Grab is offering a daily S$50 discount for six months on rents for existing ComfortDelGro drivers to join any of Grab’s five partner taxi firms: Trans-Cab, Prime Taxi, SMRT Taxis, Premier and HDT Singapore Taxi. The discounts are higher if drivers switch to a private-hire car via Grab’s rental arm, GrabRentals.


.................................
Not vested. Monitoring.

"Under its campaign, Grab is offering a daily S$50 discount for six months on rents for existing ComfortDelGro drivers to join any of Grab’s five partner taxi firms: Trans-Cab, Prime Taxi, SMRT Taxis, Premier and HDT Singapore Taxi. The discounts are higher if drivers switch to a private-hire car via Grab’s rental arm, GrabRentals."

wait a sec... you mean Grab has partnered with all the other smaller taxi operators EXCEPT CDG?!
WHY?
This looks like a deliberate all out war

(20-09-2017, 12:38 AM)TTTI Wrote: "Under its campaign, Grab is offering a daily S$50 discount for six months on rents for existing ComfortDelGro drivers to join any of Grab’s five partner taxi firms: Trans-Cab, Prime Taxi, SMRT Taxis, Premier and HDT Singapore Taxi. The discounts are higher if drivers switch to a private-hire car via Grab’s rental arm, GrabRentals."

wait a sec... you mean Grab has partnered with all the other smaller taxi operators EXCEPT CDG?!
WHY?
This looks like a deliberate all out war

The partnership of Grab with the "rest of Spore except CDG" came in last year (refer to link below):

https://www.valuebuddies.com/thread-445-...#pid142189

My guess about CDG not partnering with Grab is because it does not want its lucrative booking system cannibalized by its own action and then it failed to come up with a comparable one to match - there are tons of business case studies that talked about such behavior been the norm. More often, i guess been the market leader for so long, doesn't help much as well.

Maybe someone can enlighten me...I am not sure for Singapore, but in New York, a taxi license cost several hundred thousands and had even hit a high of one million....and Uber is available in New York?? And the regulator or authority lets it???

I also remembered someone told me how difficult to get taxi license in London....It's like a rare commodity.

Why is there no need for stricter regulation, for example how many private hire to be allowed? The current private hire cars reminds me of the old days "Ba Wang Che" except that the price is fixed.

(20-09-2017, 08:06 PM)Millionfaith Wrote: Maybe someone can enlighten me...I am not sure for Singapore, but in New York, a taxi license cost several hundred thousands and had even hit a high of one million....and Uber is available in New York?? And the regulator or authority lets it???

I also remembered someone told me how difficult to get taxi license in London....It's like a rare commodity.

Why is there no need for stricter regulation, for example how many private hire to be allowed? The current private hire cars reminds me of the old days "Ba Wang Che" except that the price is fixed.

Perhaps... but why should we follow New York?
The Americans have all sorts of dumb policies, because of their vocal population and their workers rights groups and all that.
In SG, the gov is more focused on letting the free markets determine who's the winner, of course, with a light touch of regulation.

If the private hire cars start showing more problems, then they'll step in.