Hot stock: ComfortDelGro rises on heavy trading; analysts positive on platform fee charge

SHARES of ComfortDelGro (CDG) climbed on Wednesday (Jun 21) morning, the day after the taxi operator announced that it would implement a S$0.70 platform fee charge for rides booked via its app, Zig, from Jul 1.

As at 11.12 am, the counter was up S$0.03 or 2.6 per cent at S$1.18, with 6.4 million of its shares changing hands.

It had closed on Tuesday S$0.01 or 0.9 per cent higher at S$1.15 after 21.8 million shares were traded, following the announcement.

Analysts from DBS Research and RHB Securities were positive on the news, with DBS calling it a “positive step and good signal” that could result in a relatively material uplift in financial benefits for CDG.

Based on ballpark estimates from DBS, the move could amount to a revenue uplift of S$15 million to S$18 million – potentially adding an 8 per cent boost to the research house’s forecast.

“This strategy highlights management stance to recoup costs and confidence that it should not impact ride-hail bookings significantly as this is largely in line with peers,” said DBS on CDG’s plans to implement its platform fee. “We also noted that there has been upgrades to its Zig app, as per its communication to shareholders during its annual general meeting that its app would be refreshed with new and improved features.”

Likewise, RHB believes that CDG’s service fee enhancements are likely to help the group retain its current driver pool, while attracting new drivers for its taxi and ride-hailing operations. It continues to expect a gradual improvement in CDG’s H2 FY2023 earnings, while maintaining the view that the stock’s current forward price-to-earnings valuation is “too cheap to ignore”.

DBS and RHB both reiterate their “buy” calls on the stock, with DBS’ target price of S$1.62 and RHB’s at S$1.25.

ComfortDelGro closed 1.7 per cent higher at S$1.17 on Wednesday.