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Broker's take: OCBC upgrades ComfortDelGro to 'buy'
ANALYSTS at OCBC Investment Research have upgraded their call on ComfortDelGro from "hold" to "buy"; increasing the fair value of the taxi operator's shares from S$2.12 to S$2.25.
OCBC stated that it expects the taxi business to remain highly competitive and forsees the rate of decline in ComfortDelGro's taxi business to slow down in fiscal 2018.
However, this may result in a lower operating margin in order to incentivise existing hirers to continue renting the taxis.
More importantly, OCBC highlighted that if ComfortDelGro's planned alliance with ride-haling behemoth Uber is approved, ComfortDelGro's earnings outlook may stand to benefit through the stabilisation of taxi idle rate.
According to ComfortDelGro's management, its taxi fleet size shrank over fiscal 2017 and the idle rate has remained in the low single-digit level.
For fiscal 2018, the company intends to maintain the size of its fleet and would only replace taxis that are due to be scrapped if there is demand for it.
The partnership may also open up potential opportunities from the enlarged fleet to sell petrol and provide vehicle maintenance services, OCBC added.
ComfortDelgro shares were trading S$0.01 or 0.5 per cent higher at S$2.02 as at 11.36am on Tuesday.