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Do not ignore structural threats to Comfordelgro, warns analysts

Private-hire cars are rapidly increasing, for starters.

Analysts are cautioning Comfortdelgro (CDG) investors to stay on their toes.

According to a report by Maybank Kim Eng (Maybank KE), structural threats to CDG’s taxi business cannot be ignored despite resilient profits so far.

Citing statistics on Sole-Proprietors and Partnerships registered for the Transport and Storage industry, Maybank KE estimates there could be 7,500 private-hire cars currently in the Singapore market. This is more than a quarter of the 28,200 taxis in the market, and almost half of CDG’s taxi fleet of 17,000.

In addition, the recent pullback in COE prices may provide a golden opportunity for new entrants to replace their older fleets and expand their presence.

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Maybank KE further warns not to pin hopes on catalyst from bus asset sales. The government’s bus procurement budget of $224.8m for this year is much smaller than the $1b of bus assets held by incumbents. Therefore, Maybank KE opines that expectations of a windfall from the sale of CDG’s bus assets are unlikely to be met.

Over the past five years, CDG’s earnings have been driven by its taxi segment. However, given the mounting headwinds against CDG, taxi earnings are forecast to be flat.

Singapore bus and rail business is also seen to lead growth over the next three years.

Maybank KE further opines that SBS Transit, CDG’s 75%-owned subsidiary, may be a better proxy than CDG as investors in the parent will have to assume risks from the structural threats to the taxi business.



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