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Broker's take: OCBC downgrades ComfortDelGro to 'hold'
ANALYSTS at OCBC Investment Research have downgraded their call on ComfortDelGro to "hold", but have maintained its 12-month fair value price on the stock to S$2.50 as analysts wait for more clarity over the taxi operator's plans to enter the private hire car space, with new competitors also looking to crack the monopoly held by Grab since Uber's departure from the market.
This comes as ComfortDelGro, which intends to enter the private hire car space, said on May 26 that it will no longer acquire a 51 per cent stake in Uber's wholly owned car rental subsidiary in Singapore, Lion City Holdings. The acquisition, valued at about S$642 million, was dependent on the taxi operator being able to use the Uber app here.
The analysts view the termination of the proposed acquisition as a positive for ComfortDelGro, "as it frees up S$295 million in cash consideration that would have been spent on assets that may become unproductive without the partnership with Uber".
"We believe walking away from this acquisition allows ComfortDelGro to make other accretive acquisitions to grow its businesses, potentially outside of the disrupted taxi segment."
Despite the termination of the deal, ComfortDelGro still intends to go into the segment and has said that it is most likely to do so with private hire car operators rather than creating a new platform.
Indonesian ride-hailing giant, Go-Jek, announced on May 18 that it will launch services into four new markets including Singapore over the next four months.
The analysts said: "Go-Jek is also reported to be in discussions with ComfortDelgro in a potential partnership in Singapore but it remains a speculation at this stage.
"All considered, we deem a tie-up with Go-Jek a positive one as it may potentially lead to more booking jobs for ComfortDelGro taxi hirers through Go-Jek’s private hire car platform, translating to lower fleet idle rate as drivers are less incentivised to return their taxis with more sustained earnings."
ComfortDelGro shares were trading S$0.02 or 0.8 per cent lower at S$2.44 as at 10.04am on Friday.