ComfortDelGro has one certainty in Uber-Grab deal: Uncertainty

A Grab taxi in SingaporeA Grab taxi in Singapore

With ride-hailing service Uber’s deal to sell its Southeast Asian assets to local rival Grab, one thing seems certain for ComfortDelGro: uncertainty, especially over the Singapore taxi company’s own deal with Uber.

CGS-CIMB said it believed there was a “high likelihood” that ComfortDelGro would renegotiate its proposed deal to buy 51 percent of Uber’s Lion City Rentals rental car fleet for S$642 million.

As for potential scenarios, CGS-CIMB pointed to the possibility that ComfotDelGro could renegotiate the deal and partner with Grab and LCR.

“We believe this the more positive move for CD as it helps them to ring-fence their interests, enables them to enter the private-hire space and have both interests aligned; especially if the purchase price for LCR could be negotiated lower,” the brokerage said in a note dated Monday.

But CGS-CIMB pointed to another potential scenario where the Lion City deal is abandoned, keeping the taxi segment at the status quo.

Potential negatives

“This could have a mildly negative connotation, if competition for future clients and drivers from its heavyweight rival Grab (post merging with Uber) in the private-hire space does not wane,” it said.

But the brokerage also pointed to other uncertainties, such as whether Grab will want to take over Lion City’s fleet since it has its own assets and access to third-party vehicles currently.

CGS-CIMB also noted that ComfortDelGro’s deal with Uber over Lion City had faced an extended review with competition regulators.

“We believe the lengthy review of the CD/Uber deal sets a precedence in terms of timeline for the review and sanctioning the Grab/Uber deal as this merger could create another dominant market leader, this time among ride-hailing apps,” the note said.

CGS-CIMB said it was sticking with its Hold call and S$2.16 target price on the stock while waiting for further details on how ComfortDelGro’s deal with Uber will play out.

“We believe many uncertainties surround the latest developments in Singapore’s personal mobility industry. As such, we think CD could stay unexciting in the near term,” it said.

The stock was flat at S$2.04 at 12:04 P.M. SGT on Tuesday.