Brokers’ take: RHB raises ComfortDelGro target by 12.5% on strong earnings outlook
Daphne Yow
RHB Research has raised its target price for ComfortDelGro by 12.5 per cent to S$1.35 from S$1.20 and reiterated its “buy” call on the stock, it said in a report on Friday (Jun 30).
The rise in target price came after RHB increased its earnings forecast for FY2023 to FY2025 by 2 to 3 per cent, as it expects a revenue boost from lower taxi rental rebates and the introduction of a new platform fee for taxi and private-hire bookings on ComfortDelGro’s platform.
“We continue to expect earnings to gradually improve in H2 2023 amidst benefits from the annual indexation of overseas bus contracts,” said RHB analyst Shekhar Jaiswal.
The new target price implies a potential upside of 15.4 per cent from ComfortDelGro’s trading price of S$1.17 as at 1.40 pm on Friday. The counter was down 2.5 per cent or S$0.03 at the time.
RHB’s optimistic outlook is based on the indexation of higher operating costs in the UK; improved rail ridership in Singapore and the potential to raise commission rates for taxi bookings. ComfortDelGro charges only 5 per cent while Grab and Gojek levies 20 per cent.
The research team is also positive on the eventual reduction of incentives offered to taxi drivers in China in Q1 2023. It also noted ComfortDelGro’s recent foray into green energy, taxi, and vehicle inspection businesses in China.
The company had entered into a strategic partnership with Chinese transport enterprise Guangzhou Public Transport Group to develop transport-related green energy businesses, including investments in automotive electric charging and swapping stations, and ancillary solar photovoltaic and energy storage systems.
In April, the two companies also signed a memorandum of understanding (MoU) to collaborate as partners in China’s taxi business. Separately, ComfortDelGro signed a MoU to work on a Chengdu vehicle inspection centre with Chengdu Hexintong Vehicle Inspection Company.
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