Silchester International Investors, already a substantial shareholder of ComfortDelGro C52 0.75% Corp, continued to raise its stake with more acquisitions. On Dec 1, the fund manager acquired four million shares on the open market at or about $1.29 each or $5.16 million in total. This brings Silchester&rsquo s stake in ComfortDelGro to nearly 133 million shares or 6.14%, up from 5.96% previously.

 

New York-based Silchester, which was formed in 1994, first emerged as a substantial shareholder of ComfortDelGro on Nov 7 after it bought just over 1.5 million shares at about $1.34 each. The acquisition increased its stake to 5.026% from 4.955% earlier.

 

As the asset manager describes on its website, Silchester focuses on &ldquo maximising intrinsic value&rdquo measured via the earnings, assets and dividends of the companies it invests in. &ldquo We implement this by a strong price discipline &mdash lower multiples of earnings, assets and dividends means more earnings, assets and dividends at the outset &mdash and by a quality appraisal which seeks to identify companies capable of increasing earnings, assets and dividends by their own efforts,&rdquo says Silchester.

 

The acquisition by Silchester came just a week before ComfortDelGro announced on Dec 6 a higher fare structure to help drivers cope with higher costs including the impending Goods and Services Tax starting in the new year. The last fare revision was made just last March. In its note on Dec 7, DBS Group Research, which is keeping its &ldquo buy&rdquo call and $1.67 target price on the stock, estimates that ComfortDelGro will enjoy an additional $3 million in commission with the new fare structure.

 

Demand for taxis is not likely to be affected. &ldquo With overall point-to-point market being driver constrained, we expect demand for taxis to remain strong,&rdquo says DBS, which is expecting other smaller taxi fleet operators to follow suit.

 

In any case, before the fare structure adjustment, the company has been enjoying a recovery in its earnings.

 

Another fund management firm, Ameriprise Financial, trimmed its stake in ComfortDelGro. On Nov 14, it sold 862,4000 shares on the open market at $1.32 each. It now holds nearly 107.9 million shares or 4.982%, down from 5.021% earlier. As its stake has dropped below the 5% mark, there is no further obligation to disclose additional selling, if any.

 

In its 3QFY2023 ended September business update on Nov 14, ComfortDelGro reported a 3.8% y-o-y increase in revenue to $996.6 million. Earnings jumped 54.5% y-o-y to $49.9 million. This brings its 9MFY2023 earnings to $128.4 million, up 9.6% y-o-y, excluding a one-off gain of $30.5 million from the sale of a property in the UK.

 

According to ComfortDelGro, it was able to collect higher fares for running buses in the UK, which had earlier suffered from higher costs without an immediate corresponding increase in contractual revenue it could collect from the UK authorities. This helped the company report an operating profit of $6.1 million for 3QFY2023 after four straight quarters of losses.

 

Meanwhile, demand for taxi and private hire rides in Singapore &ldquo remains high&rdquo although competition has been increasing. The introduction of a &ldquo platform fee&rdquo to be paid by users booking rides on its Zig app since July helped lift the bottom line too. As at Sept 30, ComfortDelGro&rsquo s cash balance stood at $849.9 million, which helped contribute to its net asset value per share of 116.8 cents, versus 118.8 cents recorded in December 2022.

 

Analysts from DBS Group Research are bullish on the stock. Besides the better-than-expected 3QFY2023 numbers, they see further upside with several developments in the company&rsquo s favour, prompting them to raise their target price from $1.65 to $1.67. The platform fee for the Zig app, for one, is seen to add between $12 million and $15 million per year to the company&rsquo s bottom line since it was introduced in July.

 

Separately, with public transport operators given the go ahead to raise fares by 7% amid increasing ridership, there should be both top and bottom line uplift for the company. &ldquo The sequential improvement seen in 3Q23 and for the past two quarters should lend confidence to the recovery trajectory of the group, and that the worst has passed,&rdquo state analysts Andy Sim and Chee Zheng Feng in their Nov 15 note.

 

&ldquo With expected earnings recovery in the coming FY2024, valuations at 1.1x P/B and 13.4x P/E look undemanding, along with its strong balance sheet,&rdquo they add.

 

ComfortDelGro is revising its taxi fare structure to help cabbies defray higher operating costs due to rising fuel prices, high inflation and the impending Goods & Service Tax (GST) hike. 

 

ComfortDelGro shares are up 2.31% as at 2.37pm.

 

With effect from Dec 13, the flag down fare will be increased by 50 cents. Depending on the vehicle type, the new flag down fare will be between $4.40 and $4.80. The subsequent distance-based rate will go up to 26 cents from 24 cents.

 

With this adjustment, the estimated fare for a 10km off-peak normal taxi trip will increase by 6.8% or 94 cents from S$13.80 to $14.74. 

 

The definition of " evening peak hour" , where a surcharge is applicable, will be extended by an hour from 5:00pm to 11:59pm, effective Monday through Sunday, including public holidays. 

 

A new peak hour surcharge will also be implemented from 10:00am to 1:59pm on Saturdays, Sundays, and public holidays. 

&ldquo For the past few years, our cabbies&rsquo earnings had been impacted first by the pandemic, and then by higher operating expenses due to increase in fuel prices and high inflation," says Tommy Tan, CEO of the company' s taxi business.

 

" This carefully considered move to update our fare structure is necessary. It ensures that our cabbies receive fair earnings with the rising cost of operations. 

 

" As we analyse taxi demand patterns, there is also a need to review the evening peak hours and introduce weekend peak hour surcharge to ensure adequate taxi supply to meet increased commuter needs during the peak hours," he adds.

Analyst TPs

 

CIMB: BUY $1.55

DBS: BUY $1.67

Maybank: BUY $1.55

OCBC: HOLD $1.38

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LAND transport giant ComfortDelGro : C52 -0.76% posted a 54.5 per cent rise in net profit to S$49.9 million for the third quarter ended Sep 30, 2023, from S$32.3 million a year earlier.

 

The company noted that its profit after tax and minority interests (Patmi) margin for the quarter rose to 5 per cent, from 3.4 per cent a year earlier. Revenue over the same period rose 3.8 per cent to S$996.6 million, from S$960.3 million a year ago.

 

In a business update on Tuesday (Nov 14), the company noted that its public transport business improved as renewals and indexation in the UK continued to improve margins.

 

Revenue for its public transport business in Q3 grew 3.4 per cent year on year to S$758.5 million, while operating profit gained 23.8 per cent to S$33.8 million.

 

As for its taxi and private hire business, the company noted that demand remains high, although competition is increasing.

 

It added that it has introduced a platform fee to its Zig app since July this year, and that its taxi fleet size holds firm, with a slight increase in market share.

 

Revenue for its taxi and private hire business in Q3 grew 3.3 per cent to S$147.6 million, as operating profit rose 43.5 per cent to S$28.7 million.