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Hot stock: ComfortDelGro rises after new rules for private-hire drivers

Wednesday, April 13, 2016 - 10:05

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SHARES of taxi operator ComfortDelGro (CDG) climbed in early trading on Wednesday after new rules requiring private-hire car drivers to have licences were announced in Parliament on Tuesday.

The stock had climbed five Singapore cents or 1.8 per cent to S$2.86 as at 9.10am. It closed 10 Singapore cents or 3.6 per cent higher at S$2.91 with some 13.8 million shares changing hands.

Under the new regulations, private-hire car drivers such as those working for ride-hailing app services Uber and GrabCar will need to get a licence by the first half of next year and their private-hire cars will have to be registered with the Land Transport Authority.

But taxi drivers who want to drive for private-hire car companies can easily get a private-hire car driver's vocational licence by attending a two-hour briefing on the regulations for chauffeured services.

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Market voices on:

The rule changes announced on Tuesday are not expected to dent CDG's taxi business but may affect smaller taxi outfits, analysts said Wednesday morning.

Maintaining its "buy" on CDG with a S$3.60 target price, RHB said in a note it saw "negligible downside risk" to CDG's taxi business, "which may continue to grow despite competition from private car hire apps".

"We see downside risks only for smaller taxi companies that lack a robust taxi booking infrastructure. We remain positive about CDG's ability to deliver 30 per cent profit growth in FY16, with a low risk profile in an uncertain economic environment."

OCBC Investment Research maintained "neutral" on the land transport sector but said it had a "buy" on CDG with a S$3.40 fair value. It rated SMRT a "hold" with a S$1.51 fair value.

"We believe the new regulations do not really close the gap between taxi operators and private hire car services in terms of standards and requirements. Therefore, we do not rule out the possibility of further changes or introduction of new measures," it said in its note.

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