ComfortDelGro to gain from Grab-Uber deal, likely rail-fare hike: Maybank Kim Eng

THE potential acquisition of Uber by Grab, reported by Bloomberg, could be positive for ComfortDelGro if it happens in Singapore, as the consolidation could reduce competition for the taxi industry, Maybank Kim Eng analyst John Cheong wrote in a Friday report.

However, regulatory hurdles could block the deal, he added: "In Singapore, it might be difficult for Grab to acquire Uber, as the regulators are very much against market dominance by a single player."

In the note, Mr Cheong posited three scenarios for Comfort if an Uber-Grab merger in Singapore goes through:

1) Comfort continues to acquire Uber's car-rental fleet and partners Grab instead of Uber;

2) Comfort calls off the deal and Grab acquires Uber's car-rental fleet along with Uber's booking app. This is less likely as Grab's current business model involves partnering other vehicle-rental companies, instead of owning a large fleet of vehicles in-house; and

3) UberFlash should continue, as Uber's ride-booking app is likely to stay. Following the acquisition of Uber by Didi Chuxing in China in 2016, Uber's app was retained.

Mr Cheong also eyed two possible positive catalysts for Comfort, raised by the Ministry of Transport during the Budget debate.

These include a possible rise in rail fares, as Comfort shares fare revenue with the government.

"Operating costs have risen by around 60 per cent over the past five years, but fares have gone down by 2 per cent. The key timeline is the conclusion of the fare formula review by the Public Transport Council, targeted by the first quarter of 2018," Mr Cheong wrote.

A second catalyst could be the further regulation of private-hire car services operated by Uber and Grab, which could level the playing field for Comfort's taxi unit.

Maybank Kim Eng maintained its "buy" call on ComfortDelGro with a S$2.35 target price.