Comfortdelgro pins Hopes on Bus and Rail
Comfortdelgro (CDG) is definitely feeling the pressure these days from private car hire rivals. Its taxi segment had to resort to rightsizing measures, further reducing its fleet size to just roughly 15,000 taxis. Analysts note that the company is attempting to survive the revenue bleeding from its taxi segment, which posted a 10.7% drop in the second quarter of 2017, whilst waiting for its bus and rail segments to pick up the slack.
Andy Sim, analyst at DBS, foresees rough roads ahead for Comfortdelgro’s taxi business. He reckoned fleet size will contract again next year—it is already down by 7.5% and 8.9% from December 2016 and April 16, respectively—and average revenue per taxi to dip by 3% each year.
The aggressive expansion of private hire care services will continue to impact Comfortdelgro’s taxi business, with Eugene Chua, lead analyst at OCBC, forecasting taxi revenue to fall 15% and 8% in FY17 and FY18, respectively.
Meanwhile, with the opening up of its rail business, DTL3 will break even in the second half of 2018, said John Cheong, analyst at Maybank Kim Eng. The tender results for the Thomson East Coast Line will likely prove favorable for the transport firm, although the contract will not start until 2019, meaning this growth catalyst will only kick in the medium to longer term horizon.
Shekhar Jaiswal, analyst at RHB, acknowledges growth potential in the bus segment if Comfortdelgro can expand in key markets overseas. In United Kingdom, the company is now seeking further opportunities outside of London.