ComfortDelGro    Last:1.3   -

ComfortDelGro fundamentally strong but price weak

BANDUNG RESEARCH - LETS ADD THE MILK

Uber' s Loss Exceeds $800 Million in Third Quarter on $1.7 Billion in Net Revenue

 

lol...Rosesyrup - why not add some milk --> make it bandung...nicer =D

The_Crow      ( Date: 27-Dec-2016 18:22) Posted: Rosesyrup Research   CDG, a drying cash cow Reccomendation: Short Sell                                                                                                           Target price: $1.62                                                                                                                                                             Downside: 59% ComfortDelGro Group (CDG) The land transport company is involved in an array of businesses ranging from maintance of vehicles to taxi rental, with operation in different parts of the world. To make analysing this well diversified company more bearable, in this report we will only look at CDG' s operations which have significant impact on the group financial figures. As of the end of 2015, around 80% of the firm profit came from its taxi and bus operation. Its operations in Singapore and UK derived 75% of the group profit, while operation in Austrialia only accounted for 14% of its profit.   New and stronger competitors on the horizon For decades, the two Singapore bus operators had enjoyed a long period of stability and little competition. However all these are starting to change under the new Bus Contracting Model intiated by the government to improve local transportation efficiency. Under the new model, all buses routes are divided into 12 packages with only 3 of them opened to foregin competitors' bids- CDG lost all 3 packages to foregin operators. As the governement continues to push for efficinecy and open up more packages for foregin bids, we expect the inefficient and uncompetitive CDG to lose out even more.   On the taxi scene, we see the entrance of new players, such as Uber and Grab. With their new business model they are able to offer arguably better services than CDG, without owning a single fleet. The fast rising of these new players throughout the world is another testimony of how deadly a threat the new business model is to the traditional operators like CDG. In fact the company revenue growth rate slowed from its long term average of 4.5% to only 1.5% in 2015.   Despite the obvious danger, we noticed that alot brokerage houses (RHB, UOB, OCBC, DBS, CIMB etc) continued to make buy call on CDG in late 2016 and the common reason they gave was the financial figures released by CDG was little affected after the entrance of Uber. While it is good to consider other analyst opinions, we would like to introduce a new concept for readers to ponder about when making their investment decision. When it comes to analysing new technology such as Uber or even Iphone, one important factor to consider is the penetration rate- percentage of the market which has adopted the new technology. Uber has a 20% penetration rate in US where one the largest cab operator in San Francisco has filed for bankruptcy. As of 2016, penetration rate in Singapore stands at only 4%. Do note that we are not saying CDG might face the desinity as its counter part in San Francisco. We are simply pointing out that it is too early to say Cab hiring apps post negligible threat to CDG, as the the financial figures released by CDG has yet to reflect the full brunt of the disruptive technology.     Rising Oil Price The oil price slump started off in 2014 was mainly caused by the price war among OPEC members fighting for market shares. Energy reliant transportation companies like CGD are among the greatest beneficiaries from the depressed oil price. As a result CGD share price spiked sharply from $2 at the beginning of 2014 to a peak of $3.21 in June 2015, representing 60% gain.   However all these cost saving are about to end with agreement signed by OPEC in Dec 2016 to cut supply glut and end the price war. While many brokerages reports stated the rise in oil price as a potential risk to investing in CDG, we believe the $3 target prices have yet to take into account of this risk factor which has become reality in Dec 2016.   Full acquisition of ComfortDelgro CabCharge (CDC) In Dec 2016, CDG announced the acquisition of 49% stake it did not already owned in a joint venture with Cabcharge Austrialia. We see this as a welcoming strategy to further diversify the group source of income to minimize the impact of economy downturn in UK and Singapore on the company performance.   However as the acquisition represents significant cash outlay by CGD, this together with more uncomfortable ride ahead, lead us to believe that the company will stick to the lower end of their pledged (min 50%) dividend payout policy in the coming years.   Valuation In this sector, we attempt to value CDG share price based on the following assumptions:   DDM model: CDG has been issuing pretty stable dividend 50% payout rate New technology penetration rate to hit 20% by 2019: Though we honestly doubt it would need that long as Singapore is a much smaller market compared to US. Oil price stay at $90- this was the average before 2014 slump.     Under these assumptions, the target we got is $1.62. This represents a 59% downside potential.   Reccomendation Lower revenue from more intensed competition as well as higher cost structure is bound to hit CDG bottom line and the amount of revenue it can afford to pay out in the coming years. Although CDG recent move to further expand its business in Australia would definitely has an effect of diversifying its income and stablizing its dividend, we do not see it as sufficient. Afterall its operation in Australia accounts for less than 10% of the group revenue. We also do not see it as a strategy to counter the threat posted by disruptive technology.   CDG used to be a cash cow investment handing out stable and growing dividends to shareholders. However with the changes in macro environment, it is about to face unprecendant challenges which it is illy prepared for. While the market and various brokerage houses remain excessively optimisitc about the company prospect and keep calling for ridiculously high target prices which have not been seen for months, we reccomend investors to take advantage of the irrational optimistism in the market and short the shares to its fair value.

 

i also think it is too early to conclude no impact from Uber and Grab.

 

Rosesyrup Research

 

CDG, a drying cash cow

Reccomendation: Short Sell                                                                                                           Target price: $1.62

                                                                                                                                                            Downside: 59%

ComfortDelGro Group (CDG)

The land transport company is involved in an array of businesses ranging from maintance of vehicles to taxi rental, with operation in different parts of the world. To make analysing this well diversified company more bearable, in this report we will only look at CDG' s operations which have significant impact on the group financial figures. As of the end of 2015, around 80% of the firm profit came from its taxi and bus operation. Its operations in Singapore and UK derived 75% of the group profit, while operation in Austrialia only accounted for 14% of its profit.

 

New and stronger competitors on the horizon

For decades, the two Singapore bus operators had enjoyed a long period of stability and little competition. However all these are starting to change under the new Bus Contracting Model intiated by the government to improve local transportation efficiency. Under the new model, all buses routes are divided into 12 packages with only 3 of them opened to foregin competitors' bids- CDG lost all 3 packages to foregin operators. As the governement continues to push for efficinecy and open up more packages for foregin bids, we expect the inefficient and uncompetitive CDG to lose out even more.

 

On the taxi scene, we see the entrance of new players, such as Uber and Grab. With their new business model they are able to offer arguably better services than CDG, without owning a single fleet. The fast rising of these new players throughout the world is another testimony of how deadly a threat the new business model is to the traditional operators like CDG. In fact the company revenue growth rate slowed from its long term average of 4.5% to only 1.5% in 2015.

 

Despite the obvious danger, we noticed that alot brokerage houses (RHB, UOB, OCBC, DBS, CIMB etc) continued to make buy call on CDG in late 2016 and the common reason they gave was the financial figures released by CDG was little affected after the entrance of Uber. While it is good to consider other analyst opinions, we would like to introduce a new concept for readers to ponder about when making their investment decision. When it comes to analysing new technology such as Uber or even Iphone, one important factor to consider is the penetration rate- percentage of the market which has adopted the new technology. Uber has a 20% penetration rate in US where one the largest cab operator in San Francisco has filed for bankruptcy. As of 2016, penetration rate in Singapore stands at only 4%. Do note that we are not saying CDG might face the desinity as its counter part in San Francisco. We are simply pointing out that it is too early to say Cab hiring apps post negligible threat to CDG, as the the financial figures released by CDG has yet to reflect the full brunt of the disruptive technology.

 

 

Rising Oil Price

The oil price slump started off in 2014 was mainly caused by the price war among OPEC members fighting for market shares. Energy reliant transportation companies like CGD are among the greatest beneficiaries from the depressed oil price. As a result CGD share price spiked sharply from $2 at the beginning of 2014 to a peak of $3.21 in June 2015, representing 60% gain.

 

However all these cost saving are about to end with agreement signed by OPEC in Dec 2016 to cut supply glut and end the price war. While many brokerages reports stated the rise in oil price as a potential risk to investing in CDG, we believe the $3 target prices have yet to take into account of this risk factor which has become reality in Dec 2016.

 

Full acquisition of ComfortDelgro CabCharge (CDC)

In Dec 2016, CDG announced the acquisition of 49% stake it did not already owned in a joint venture with Cabcharge Austrialia. We see this as a welcoming strategy to further diversify the group source of income to minimize the impact of economy downturn in UK and Singapore on the company performance.

 

However as the acquisition represents significant cash outlay by CGD, this together with more uncomfortable ride ahead, lead us to believe that the company will stick to the lower end of their pledged (min 50%) dividend payout policy in the coming years.

 

Valuation

In this sector, we attempt to value CDG share price based on the following assumptions:

 

• 
  
  DDM model: CDG has been issuing pretty stable dividend
• 
  
  50% payout rate
• 
  
  New technology penetration rate to hit 20% by 2019: Though we honestly doubt it would need that long as Singapore is a much smaller market compared to US.
• 
  
  Oil price stay at $90- this was the average before 2014 slump.

 

 

Under these assumptions, the target we got is $1.62. This represents a 59% downside potential.

 

Reccomendation

Lower revenue from more intensed competition as well as higher cost structure is bound to hit CDG bottom line and the amount of revenue it can afford to pay out in the coming years. Although CDG recent move to further expand its business in Australia would definitely has an effect of diversifying its income and stablizing its dividend, we do not see it as sufficient. Afterall its operation in Australia accounts for less than 10% of the group revenue. We also do not see it as a strategy to counter the threat posted by disruptive technology.

 

CDG used to be a cash cow investment handing out stable and growing dividends to shareholders. However with the changes in macro environment, it is about to face unprecendant challenges which it is illy prepared for. While the market and various brokerage houses remain excessively optimisitc about the company prospect and keep calling for ridiculously high target prices which have not been seen for months, we reccomend investors to take advantage of the irrational optimistism in the market and short the shares to its fair value.

 

 

 

Hopefully this is the way for growth.

evergreen3      ( Date: 23-Dec-2016 10:42) Posted: [b] Comfortdelgro Could Rise 40% After Aussie Bus Deal[/b] http://www.barrons.com/articles/BL-AFUNDSB-8143

 

[b] Comfortdelgro Could Rise 40% After Aussie Bus Deal[/b] http://www.barrons.com/articles/BL-AFUNDSB-8143

 

This and + the fact that rising oil price affects operating cost and net profit.

investshare      ( Date: 12-Dec-2016 12:26) Posted: For me, the last 10 times i book taxi, i use Grab App 10 out of 10 times. Out of these 10, 2 were Comfort taxi, remaining 8 from non-Comfort taxi companies.  I don t use GrabCar or Uber. investshare      ( Date: 08-Dec-2016 07:51) Posted: Actually I think the biggest threat is not new driver join Uber or Grab, BUT it is new driver join other taxi companies. In the past, when ppl book taxi, they most likely use Comfort because it has largest fleet. So Comfort can charge premium for rental. But this advantage is gone now as ppl would book through Grab. So whether you are Comfort or any other taxi, there is no difference. So as a taxi driver, what is the advantage of join Comfort vs other taxi companies

 

For me, the last 10 times i book taxi, i use Grab App 10 out of 10 times. Out of these 10, 2 were Comfort taxi, remaining 8 from non-Comfort taxi companies. 

I don t use GrabCar or Uber.

investshare      ( Date: 08-Dec-2016 07:51) Posted: Actually I think the biggest threat is not new driver join Uber or Grab, BUT it is new driver join other taxi companies. In the past, when ppl book taxi, they most likely use Comfort because it has largest fleet. So Comfort can charge premium for rental. But this advantage is gone now as ppl would book through Grab. So whether you are Comfort or any other taxi, there is no difference. So as a taxi driver, what is the advantage of join Comfort vs other taxi companies? evergreen3      ( Date: 07-Dec-2016 23:28) Posted: Think for full-timers, taxi is still the best bet...cheaper diesal vs petrol...private-car owners willing to sacrifice their own car milleage? Unless they go rent a car ...taxi drivers also protected by NTA...private-cars driver on their own... Grab and uber drivers also lugi, need to use mobile data to connect to their servers and use google maps...fixed rate regardless of traffic...if uber and grab stop giving perks to these drivers, not sure if they still motivated to drive. anyway, heard of comfortdelgo rent-a-car - renting private cars...get the drift? will be patient on this counter.....

 

SINGAPORE: Southeast Asian ride-hailing service Grab said on Monday (Dec 12) it had secured an investment from Japanese automaker Honda Motor Co as part of a deal to collaborate on its motorbike-hailing service, in the latest auto industry tie-up of its type.

Grab said Honda had agreed to invest an undisclosed amount in the firm, and the two companies would form a partnership to develop the ride-sharing technology and related driver education programmes.

http://www.channelnewsasia.com/news/business/automaker-honda-invests-in-ride-hailing-service-grab/3360640.html

 

Old news... But yeah... Comfort should be more active in this kind of initiatives... More partnerships etc...

investshare      ( Date: 08-Dec-2016 14:27) Posted: Friday October 21st, 2016 Grab and CapitaLand?s Exclusive Partnership Merges Online-and-Offline to Offer ?Live, Work, Play? Mobility Exclusive partnership to enable online and offline convergence between CapitaLand?s integrated developments, shopping malls, serviced residences, offices and homes and Grab?s leading technology platform Initiative expected to reach millions of customers Grab services to be integrated into CapitaLand?s network, providing exclusive privileges and rewards to customers Singapore, 21 October 2016 ? Grab, Southeast Asia?s leading ride-hailing company, and CapitaLand Limited, one of Asia?s largest real estate developers, today signed a Memorandum of Understanding (MOU) to foster online and offline (O&O) collaboration between real estate and mobile technologies. The partnership is part of the companies? shared vision to design consumer-friendly services for future cities and is the most extensive collaboration between the two industry leaders to date, with the initiative expected to impact millions of customers.

 

Friday October 21st, 2016
Grab and CapitaLand?s Exclusive Partnership Merges Online-and-Offline to Offer ?Live, Work, Play? Mobility

Exclusive partnership to enable online and offline convergence between CapitaLand?s integrated developments, shopping malls, serviced residences, offices and homes and Grab?s leading technology platform
Initiative expected to reach millions of customers
Grab services to be integrated into CapitaLand?s network, providing exclusive privileges and rewards to customers
Singapore, 21 October 2016 ? Grab, Southeast Asia?s leading ride-hailing company, and CapitaLand Limited, one of Asia?s largest real estate developers, today signed a Memorandum of Understanding (MOU) to foster online and offline (O&O) collaboration between real estate and mobile technologies. The partnership is part of the companies? shared vision to design consumer-friendly services for future cities and is the most extensive collaboration between the two industry leaders to date, with the initiative expected to impact millions of customers.

 

Actually I think the biggest threat is not new driver join Uber or Grab, BUT it is new driver join other taxi companies. In the past, when ppl book taxi, they most likely use Comfort because it has largest fleet. So Comfort can charge premium for rental. But this advantage is gone now as ppl would book through Grab. So whether you are Comfort or any other taxi, there is no difference. So as a taxi driver, what is the advantage of join Comfort vs other taxi companies?

evergreen3      ( Date: 07-Dec-2016 23:28) Posted: Think for full-timers, taxi is still the best bet...cheaper diesal vs petrol...private-car owners willing to sacrifice their own car milleage? Unless they go rent a car ...taxi drivers also protected by NTA...private-cars driver on their own... Grab and uber drivers also lugi, need to use mobile data to connect to their servers and use google maps...fixed rate regardless of traffic...if uber and grab stop giving perks to these drivers, not sure if they still motivated to drive. anyway, heard of comfortdelgo rent-a-car - renting private cars...get the drift? will be patient on this counter.....

 

Thos Taxi dirver had to pay high rent for the car also, they not owning the car... they have to pay some portion of collected taxi fare to COMFORT...

while Grab and uber drivers normally own their car and they just do it by chance or when they are available...  they are anywhere....  just like AirBnB...

evergreen3      ( Date: 07-Dec-2016 23:28) Posted: Think for full-timers, taxi is still the best bet...cheaper diesal vs petrol...private-car owners willing to sacrifice their own car milleage? Unless they go rent a car ...taxi drivers also protected by NTA...private-cars driver on their own... Grab and uber drivers also lugi, need to use mobile data to connect to their servers and use google maps...fixed rate regardless of traffic...if uber and grab stop giving perks to these drivers, not sure if they still motivated to drive. anyway, heard of comfortdelgo rent-a-car - renting private cars...get the drift? will be patient on this counter.....

 

Hopefully all these cheap fares will channel people away from buying their own private cars and bring down the COE!

 

Think for full-timers, taxi is still the best bet...cheaper diesal vs petrol...private-car owners willing to sacrifice their own car milleage? Unless they go rent a car ...taxi drivers also protected by NTA...private-cars driver on their own...

Grab and uber drivers also lugi, need to use mobile data to connect to their servers and use google maps...fixed rate regardless of traffic...if uber and grab stop giving perks to these drivers, not sure if they still motivated to drive. anyway, heard of comfortdelgo rent-a-car - renting private cars...get the drift? will be patient on this counter.....

 

No such biz that once operate and overnite make a mulitple profits.

Unless Comfort have to think out of the box that able to satisfy their customers.

Maybe cut off booking fare, apply value link card system for 10 -15% discount etc to compete other operators.

Just one word, they have to do something. If they keep doing nothing, these pcs of cake will get control by others.

evergreen3      ( Date: 06-Dec-2016 22:31) Posted: Grab and Uber are losing monies like water due to cheap funding - clearly loss-making companies. When the funding stops, they will stop too. Look at Karhoo... and wait till the regulations set in next year... Good luck Grab and Uber. Thank you for all the subsidies you provide at your own expense. Quite soon, I will look back and miss the good times...

 

The eventual big loser are the private funds that believe in their business model. Already a few pirate taxi outfit left here. Karhoo private funds lost $250 m already (reported by The Edge). Let' s watch how Uber and Grab cut each other' s throat at the ring seat.

 

Grab and Uber are losing monies like water due to cheap funding - clearly loss-making companies. When the funding stops, they will stop too. Look at Karhoo... and wait till the regulations set in next year...

Good luck Grab and Uber. Thank you for all the subsidies you provide at your own expense. Quite soon, I will look back and miss the good times...

 

Agree, Comfort will need to up their game if they don' t want to lose market share.

sengsk      ( Date: 06-Dec-2016 19:51) Posted: They are helping our Singapore Taxi over work and lighten down their job. This is also part of lesson for other career, if you unable to satisfy customer needs you will take over by others who can. sun233      ( Date: 06-Dec-2016 19:42) Posted: Grab introduces GrabShare, sharing paid car-pooling market with Uber RIDE-HAILING platform Grab launched its first commercial car-pool service GrabShare that puts it one step deeper in a market dominated by rival Uber. Available from Tuesday, the GrabShare service pairs just two passenger bookings with similar trip routes within a single trip, said Grab in a release. Passengers will experience a maximum of two stops before reaching their destinations. For example, if passenger A commences the ride and is paired with passenger B, depending on the more efficient trip route, passenger A may make a first stop to pick up passenger B and a second stop to drop off passenger B. This new offering is the company' s fourth transport service in Singapore. It is the commercial extension of GrabHitch. It also follows Grab' s introduction of taxi-hailing service GrabTaxi and private hire car-hailing service GrabCar. Its launch also puts it in the same arena as one currently serviced by UberPool, a similar commercial car-pooling service offered by Uber for its commercial car-hailing service UberX. About one in every three UberX trips in Singapore is car-pooled Grab says GrabShare' s matching algorithm ensures passengers get to their destinations in the shortest possible time. The algorithm, conceptualised, designed and engineered across Grab' s three research and development centres in Singapore, Seattle and Beijing, calculates and determines a match by factoring the closest available drivers, travel time, overlap of trip routes, detour distance and current traffic conditions before sequencing pick-ups and drop-offs. GrabShare fares are priced up to 30 per cent lower than GrabCar Economy fares. Fares are fixed and displayed upfront. For drivers, it helps maximising potential earnings by reducing the time and distance spent on a single GrabShare ride, says Grab.

 

They are helping our Singapore Taxi over work and lighten down their job.

This is also part of lesson for other career, if you unable to satisfy customer needs you will take over by others who can.

sun233      ( Date: 06-Dec-2016 19:42) Posted: Grab introduces GrabShare, sharing paid car-pooling market with Uber RIDE-HAILING platform Grab launched its first commercial car-pool service GrabShare that puts it one step deeper in a market dominated by rival Uber. Available from Tuesday, the GrabShare service pairs just two passenger bookings with similar trip routes within a single trip, said Grab in a release. Passengers will experience a maximum of two stops before reaching their destinations. For example, if passenger A commences the ride and is paired with passenger B, depending on the more efficient trip route, passenger A may make a first stop to pick up passenger B and a second stop to drop off passenger B. This new offering is the company' s fourth transport service in Singapore. It is the commercial extension of GrabHitch. It also follows Grab' s introduction of taxi-hailing service GrabTaxi and private hire car-hailing service GrabCar. Its launch also puts it in the same arena as one currently serviced by UberPool, a similar commercial car-pooling service offered by Uber for its commercial car-hailing service UberX. About one in every three UberX trips in Singapore is car-pooled Grab says GrabShare' s matching algorithm ensures passengers get to their destinations in the shortest possible time. The algorithm, conceptualised, designed and engineered across Grab' s three research and development centres in Singapore, Seattle and Beijing, calculates and determines a match by factoring the closest available drivers, travel time, overlap of trip routes, detour distance and current traffic conditions before sequencing pick-ups and drop-offs. GrabShare fares are priced up to 30 per cent lower than GrabCar Economy fares. Fares are fixed and displayed upfront. For drivers, it helps maximising potential earnings by reducing the time and distance spent on a single GrabShare ride, says Grab.