ComfortDelGro upgraded to Outperform by Macquarie

ComfortDelGro taxi in SingaporeComfortDelGro taxi in Singapore

Macquarie upgraded ComfortDelGro to Outperform from Neutral, saying the “worst could be over.”

“CD’s resumption of placing new taxi orders is a sign of improving confidence in its taxi business, in our view,” Macquarie said in a note this week, pointing to ComfortDelGro’s order for 200 new hybrid Hyundai Ioniqs, the first order in 18 months.

The note said that management recently has seen more drivers switching from private hire car to taxis, with its drivers able to take more booking jobs.

“We think that, while there are still uncertainties over taxi business (e.g. disruptions from new entrants Ryde and Go-Jek, and driver shortage due to enforcement of PDVL framework), the worst time for taxi could have been over,” Macquarie said.

It also pointed to other reasons to turn more positive.

“Management’s increased M&A efforts will also help diversify CD’s earnings profile, and reduce CD’s exposure to future uncertainties over taxi,” Macquarie added.

It raised its 2018-20 earnings per share forecasts by 3.8-4.5 percent, pushing  up its target price to S$2.40 from S$1.95.

But it added it expected a weaker first quarter, forecasting S$63 million core net profit, down 11.8 percent on-year, with a lower taxi profit partly offset by a positive foreign-exchange effect from the stronger pound sterling. Earnings were set to be released after the market close on Friday.

“CD’s net profit should stabilise/improve from the second quarter onwards, with taxi bottoming and acquisitions completed,” it said.

The stock ended Thursday at S$2.34.