RHB: Signs of stabilization in ComfortDelGro’s taxi business despite earnings miss

ComfortDelGro taxi in SingaporeComfortDelGro taxi in Singapore

ComfortDelGro’s first-quarter earnings missed expectations largely on a weaker-than-expected taxi performance, but the segment is showing signs of stabilizing, RHB said in a note on Monday.

ComfortDelGro reported net profit attributable to shareholders for the first quarter fell 19.6 percent on-year to S$66.3 million, due to a year-earlier boost from S$10 million in special dividends. Revenue rose 1.0 percent on-year in the quarter to S$878.8 million, boosted by a positive foreign currency translation of S$5.2 million as the pound sterling and Chinese yuan rose, the taxi operator said.

RHB said first-quarter profit was only 21 percent of its full-year estimate, largely on the weaker taxi business. But it added that it expected the segment to stabilize amid more rational competition after the departure of Uber.

“There has been a small but visible improvement in demand for taxis with CD witnessing a net addition of taxi drivers to its fleet. CD has
stopped scraping older taxis and has ordered 200 new taxis,” it said.

“We await the final outcome of ComfortDelGro’s deal with Uber, on the likely acquisition of Lion City Rental’s (LCR) private hire car fleet and the group’s definitive strategy to expand into private hire car business,” RHB said. “In the near term, the public transport services segment remains the growth driver, with contributions from new bus services and higher rail revenue in Singapore, along with higher revenue from overseas operations.”

It raised its 2018-20 earnings forecasts by 11-14 percent on higher public-transport service revenue and a stable outlook for the Singapore taxi business, compared with previous expectations for a revenue decline. RHB increased its target price to S$2.20 from S$1.98.

But it kept a Neutral call, although it added that an announcement of a “definitive strategy” for expanding into the private hire care business could be a re-rating catalyst.

The stock ended Monday up 0.43 percent at S$2.34.