ComfortDelGro

Smooth ride ahead Price target:

UOB Kay Hian “buy” $1.78

UOB Kay Hian’s Lucas Teng has maintained his “buy” rating on ComfortDelGro (CDG) with a target price of $1.78, citing an “encouraging uptrend” in taxi fares and rides, as well as extended government support.

Teng says taxi rides are back to 70% of pre-Covid-19 levels, while fares are at 70-80% of pre-Covid-19 levels, comparable with its ride-hailing peers.

Furthermore, CDG’s rental waivers for taxi drivers are being progressively reduced, coming down from 30% in August to 25% in September.

The government has also set aside $106 million for the sixmonth extension of the Special Relief Fund (SRF) to March 2021. The SRF was enacted to help active taxi and private-hire drivers defray business costs by providing a monthly payout of $300 per vehicle per month, which averages out to about $10 per day. The extended support aims to continue the assistance for

drivers, and the temporary liberalisation of point-to-point regulations that allow for the use of taxis and private hire in delivery services continues to be in place.

Teng also expects the new regulations for the Private Hire Car Driver’s Vocational Licence (PDVL) to level the playing field for taxis while potentially right-sizing the large number of private-hire fleets in the market.

He estimates indicate that taxis have largely retained its market share of total point-to-point rides, comparable to 2019 levels, which is “a positive sign for continued demand in street hail rides.”

Overseas, he says that the gradual easing of restrictions in Australia will be positive for the counter, considering that new Covid-19 daily cases have eased in Australia, especially in hard-hit Victoria.

While bus routes are still in operation with 50%-60% pre-Covid-19 ridership in New South Wales, the slight easing of restrictions in Victoria could be a “positive first step.” he says. Australia accounts for 19% of CDG’s normalised operating profit in 2019.

He also pointed out that CDG’s share price had been substantially discounted in June this year with the rise in cases in Australia. — Lim Hui Jie