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ComfortDelGro's taxi business to keep struggling until 2H17
The firm will depend on Downtown Line’s opening for revenue growth.
Although ComfortDelGro’s (CDG) 1Q17 results came in largely within expectations of analysts at OCBC despite a 2.4% YoY decline in revenue to $972.0m, it is expected that CDG’s taxi business will still be enduring troubles to come moving forward through 2017, at least until the new Downtown Line opening.
“Looking ahead, we expect its CDG’s taxi business to continue to face headwinds while revenue growth will be driven by the expected opening of DTL3 in 2H17, which serves the most populated areas compared to the first two phases. As it takes time for ridership to ramp up, we forecast for DTL breakeven from FY19. On aforementioned reasons, we cut our FY17/18F PATMI by 3%/6% and lower our FV from S$2.95 to S$2.88,” OCBC said.
According to reports, CDG currently expects revenue for taxi business to be lower while public transport services revenue to be higher. CDG’s taxi fleet idle rate has also increased from an average of 1.4% in FY16 to 3.0%-3.5% in 1Q17, despite implementing revenue sharing schemes to help lower fixed rental costs for hirers to take it up. CDG’s fleet idle rate remains well below industry average in such a challenging environment.
However, not everything is troubling for CDG, as the firm has gotten some respite in the form of $11.1m in special dividends given its 9.6% stake in Cabcharge Australia. As a result, excluding this one-off special dividend, 1Q17 core PATMI came in flat at $72.7m, and formed 22.1% of OCBC’s FY17 forecast.
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