SINGAPORE: Maybank Securities analyst Eric Ong has maintained a buy call on ComfortDelGro following the company’s recent move to increase its taxi booking commission rate.
In a note dated Jan 2, Ong highlighted two key developments contributing to his confidence in ComfortDelGro’s prospects: the increased taxi booking commission rate and its recent acquisition of A2B Australia shares, The Edge Singapore reports.
ComfortDelGro increased its taxi booking commission rate
Contrary to prevailing market trends, ComfortDelGro has raised its taxi booking commission rate by two percentage points to 7% effective Jan 1, 2024.
This decision accompanies the company’s commitment to making the existing 10% rental waiver permanent for ComfortDelGro taxi drivers.
Mr Ong anticipates that these adjustments will result in a higher EBIT of 2-3% for the current and next fiscal years. Consequently, he has revised the target price from S$1.55 to S$1.60.
ComfortDelGro acquires A2B Australia Shares
ComfortDelGro has announced its acquisition of shares in A2B Australia, a taxi network operator, for A$165.1 million.
The acquisition, at A$1.45 per share, increases ComfortDelGro’s stake in the Australia-listed company to 9.3%.
A2B Australia operates a national network of over 8,000 vehicles and serves as a technology and payment solutions provider for the personal transport industry.
Mr Ong said, “Management believes the deal is complementary to its Australian business and is in line with the group’s strategy to scale its point-to-point (P2P) mobility business in the country.”
The acquisition is expected to contribute around 2% to ComfortDelGro’s bottom line on a full-year basis upon completion by the end of the first half of this year.
The increased commission, now at 7%, is expected to generate additional revenue to ComfortDelGro, potentially offsetting the costs associated with technology upgrades and cashless transactions.
This move stands in contrast to some smaller players, such as Ryde and Gojek, which have reduced their commission rates.
Mr Ong stated, “We expect its taxi & private hire segment to continue to grow as demand for P2P trips stays firm on recovery of inbound tourism to Singapore, especially from China with the implementation of the 30-day mutual visa-free entry.”
As of 5:04 p.m. SGT, ComfortDelGro shares close at S$1.40./TISG