Comfort Delgro

[CY09]

While uber will tie up with comfort delgro, the main issue is how can comfort taxi drivers match up against uber other local partners ,

Take for example lion city rentals. Car rentals is only $53/day all in and if the drivers work for uber hitting a certain amount of trips, they get rental rebates

On the contrary, the all in rate for comfort taxis is about $79/day with no uber benefits given to comfort taxi drivers for gettinf x number of trips. IMO even if comfort ties up with uber, there is negligible effects.

Comfort has to reduce its taxi rental rates further to match uber local partners. At a rate of $60/day, it may decemiate the profitability of comfort delgro taxi segment

[karlmarx]

Uber and Grab has not been profitable, due to the heavy discounts given to passengers, and more generous subsidies/benefits given to drivers. Until grab and uber decide to slow down their cash burn through discounts and subsidies, and hence price their services to passengers and drivers at a more sustainable level, there is no way local taxi operators can compete with grab and uber.

It is not clear how CDG and Uber will cooperate. The only valuable asset CDG has is its fleet. Perhaps CDG will provide fleet management services and rent vehicles to Uber at between $53 to $79?

[CY09]

At 79/day, cdg taxi's segment made 618 mil in revenue and 72.3 mil in profits for the past 2 quarters. If the company reduces this to 65 to 70 per day, the taxi segment may start making losses assuming fleet utilisation rate stays the same.

Hence to start to compete wih other local uber partners such as car rental companies, cdg may have to start spilling red ink to survive. If it moves down to 60/day,expect yearly losses to the tune of 100 mil.

This too will affect how much cdg bids for coe for its taxis in the future. Gone are the days when comfort could purchase a taxi for 120,000 and expect great returns over the lifespan

[Bibi]

While uber will tie up with comfort delgro, the main issue is how can comfort taxi drivers match up against uber other local partners ,

Take for example lion city rentals.  Car rentals is only $53/day all in and if the drivers work for uber hitting a certain amount of trips, they get rental rebates

On the contrary, the all in rate for comfort taxis is about $79/day with no uber benefits given to comfort taxi drivers for gettinf x number of trips. IMO even if comfort ties up with uber, there is negligible effects.

Comfort has to reduce its taxi rental rates further to match uber local partners. At a rate of $60/day, it may decemiate the profitability of comfort delgro taxi segment

Hi CY09, this is what my colleague uncle told me. CDG taxis uses diesel while private rental uses much more ex petrol. CDG will change the taxi for drivers if drivers complain abt the car problem, no questions ask. CDG also perform regular maintenancce on their car fleet. He also said, CDG have a tendency to take care of their drivers.

[CY09]

Hi bibi,

Thanks for the info. That's probably why many drivers are still with them. So it's a matter of paying more for the added benefits or opting for a no frills package from the driver's pov

Not sure where I read it but recently a taxi driver from comfort was interviewed and he said his earnings are now $3,000 per month before CPF and he works on a 12 hour shift. Vis a vis car rental companies where workers work part time and are not restricted to being a Singapore citizen; I will be interested to see what comfort will do to help it's hired taxi drivers

[Art or Science]

I don't think Uber's biz model is sustainable - i mean how much longer can this continue? Their investors may not be willing to wait that long for them to turn losses to profits.

[specuvestor]

While uber will tie up with comfort delgro, the main issue is how can comfort taxi drivers match up against uber other local partners ,

Take for example lion city rentals.  Car rentals is only $53/day all in and if the drivers work for uber hitting a certain amount of trips, they get rental rebates

On the contrary, the all in rate for comfort taxis is about $79/day with no uber benefits given to comfort taxi drivers for gettinf x number of trips. IMO even if comfort ties up with uber, there is negligible effects.

Comfort has to reduce its taxi rental rates further to match uber local partners. At a rate of $60/day, it may decemiate the profitability of comfort delgro taxi segment

I don't think Uber's biz model is sustainable - i mean how much longer can this continue?  Their investors may not be willing to wait that long for them to turn losses to profits.

It's deja vu dot com. It's sustainable until the gravy train stops. Maybe will be marked by another high profile "give-up" like Julian Robertson or "Fundamental Analysis doesn't work" kind of stuff. Another similarity is rising interest rate ie cost of gravy

I think minimally CD should just price their fleet at break even to demonstrate they sharing the pain. It is obvious at some point grab / uber has to reduce cash-burn. Strategic question is to sustain the fleet and people till then

[weijian]

Uber and Grab has not been profitable, due to the heavy discounts given to passengers, and more generous subsidies/benefits given to drivers. Until grab and uber decide to slow down their cash burn through discounts and subsidies, and hence price their services to passengers and drivers at a more sustainable level, there is no way local taxi operators can compete with grab and uber.

It is not clear how CDG and Uber will cooperate. The only valuable asset CDG has is its fleet. Perhaps CDG will provide fleet management services and rent vehicles to Uber at between $53 to $79?

Uber doesn't openly reveal its detailed financials to OPMIs (only those who invested with them get the privilege of glossing through them) and so i think we can't be exactly sure that it is "heavy discounts given to passengers, and more generous subsidies/benefits given to drivers" that is driving the losses.

I managed to find a Bloomberg article that quotes "Uber’s loss before interest, taxes and stock-based compensation was $991 million in the last three months of 2016. The amount fell to $708 million in the first quarter. Spending has been driven by research into self-driving cars, expansion in Asia and aggressive hiring. Headcount has exploded to more than 15,000 employees"....So to a large extent besides the "subsidies/benefits", money has also been spent on R&D (self driving cars) and also getting dirty on CAPEX/headcount. Maybe this is where ComfortDelgro comes into the picture with regards to latter of reducing their CAPEX/headcount requirement - One has the hardware, the other has the software - so the software and hardware may be able to prosper together if they are able to "work together" in the first place to dominate the rest (INTEL and Microsoft as the easiest example off the head)

Bloomberg article: https://www.bloomberg.com/news/articles/...settlement

ComfortDelgro has enjoyed and milked its monopolistic position for a long time. It has shown its "stubborn" to give up its lucrative profits, evidenced by its previous "bullying" requesting its drivers to gather evidence of errant private hire drivers using (public funded) taxi stands as pickup/drop off points. To be honest, Uber has provided real value for the customer - on demand booking that gets fulfilled easily (anyone tried hailing a cab last time during rainy day or during certain hours when taxi drivers go "missing"?), GPS tracking and cheaper fees - and so i think they will have a upper hand in the "tie-up discussion". ComfortDelgro is stuck between a rock and a hard place

http://www.straitstimes.com/singapore/tr...re-drivers

[BRT]

The consumers have been the greatest beneficiaries. As a frequent Grabber, I've not held back and have seen how the co. has evolve and adapted somewhat. With fresh funds, I can't wait to see what new business stream they enter next. I suppose as long as cash keeps coming in at higher valuations, the music will be playing.

"Grab, Uber's rival, to raise US$2.5b from Didi, SoftBank, others"
http://www.businesstimes.com.sg/companie...ank-others

W.r.t. efforts to turn a profit, I see a lot more proactiveness from Grab versus Uber (could simply be the fact that Grab is more Asian/closer to home/I use Grab more frequently). They're targeting hawkers and retail stores with their GrabPay/e-payments system. I think this is really clever; once you have a large enough base using the Grab app (say half the population), extend the service to F&B, retail, P2P etc. All on the same platform - like WeChat, an "App for Everything".

"Grab rolls out credit transfer between GrabPay users in major push beyond ride-hailing"
https://www.techinasia.com/grabpay-credi...ween-users

[CY09]

I am going to speculate what will play out for Comfort in the next 1-2 years.

1) Hit on Singapore's taxi will bring the segment profits to the region of 50 mil next FY. I don't expect Uber and Grab to relent in their crazy cash burning exercise and hence Comfort and Transcab are going to suffer. It is also partly due to Comfort's mistake of overbidding too much for its taxis from 2012-2016. Its like buying expensive PPE only to realize utilization rate and "charter rates" have fallen (brings back memories of a certain industry)

2) Vicom's cash transferred upwards to Comfort in the form of larger dividends. This is because Comfort's borrowings has increased by 9% over the past few months and with the taxi's segment being less cash generative; Vicom is a good cash cow to milk. Perhaps we will see a repeat of Keppel-M1 episode - parent using one child's cash to preserve its ability to fight in another segment.
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In latest news (4th Sept 17), Grab is now offering a significant rental rebates to lure Comfort Delgro Drivers away. Let's see how will Comfort react.

http://www.straitstimes.com/singapore/tr...e-discount