Can Comfort DelGro regain its customers of taxi service?

Can Comfort DelGro regain its customers of taxi service?


ComfortDelGro Corporation Limited is a Singapore-based investment holding and management services company. It operates in eight segments:
1) Bus & bus station
2) Rail
3) Taxi
4) car rental and leasing
5) automotive engineering services
6) inspection and testing service
7) driving centre and
8) insurance broking services and outdoor advertising.

Summary of ComfortDelGro’s recent financial performance:

The group maintains a steady growth of net profit despite a slight revenue decline caused by unfavourable currency translation this year. With the entrance and fierce competition brought by Uber and Grab, ComfortDelGro’s taxi business succeed to keep growing profitability. The five-year lowest P/E ratio indicates it is undervalued in a greater degree by the market. However, ComfortDelGro’s actions and measures towards issue of diesel tax and further competition are vital.

Recent Event:
10 Feb 2017 ComfortDelGro: Full Yearly Results of 2016
(Source: here)

Key Financial & Operating Highlights:

1. ComfortDelGro group had a steady growth of revenue during the period from 2012 to 2015, but experienced a light drop (1.26%) of revenue in 2016, which is mainly caused by unfavourable foreign currency translation, as the Group revenue should have been increased 1.76% by $72.4m. Stable growth of both operating and net revenue can be observed, but the growth rate has been declined after 2014. Also, the group achieved its highest profit margin in 2016.


2. From the perspective of segments operation (the eight segments can be found in the previous part of Brief Background), in the financial year of 2016, more than half (57%) of the group revenue was contributed from the segment of Public Transport Services Business. One third (33%) of the group revenue was driven by the segment of Taxi business, which is also the most discussed segment in recent years because of the competition from Uber and Grab. Approximate 10% of their revenue came from the Automotive engineering services.

The chart represents revenue of the three largest segments of ComfortDelGro. According to the chart, revenue of taxi business managed to maintain slow growth under the competitive pressure of Uber and Grab, especially after the aggressive expansion of Uber in early 2015. ComfortDelGro stated in their financial report that the revenue growth in the Public Transport Services Business, Taxi business, and the Driving centre business was offset by the decrease at Automotive engineering services business, the Inspection and Testing Services Business, the Car Rental and Leasing Business and the Bus Station Business.

3. Compared to the number of 31 Dec 2015, the group burdened less secured and unsecured borrowings and less payables. Total equity had a growth of 5.96%. Net cash generated from operating activities edged up to $702.5m from $600.2m at the same period of last year. However, the amount of free cash flow has a small slide of 1%. Overall, the group maintained a stable financial and cash flow position.

4. Now the group has a P/E ratio of 16.732, lower than that of the Transport industry(33.267), it is also the lowest number observed during the five-year period since 2012. The Earning per share (EPS) is 14.7 cents, with a dividend yield of 4.187%.
(source here.)

 

ComfortDelGro’s Competition with Uber and Grab:

Are entrants of private-hire car threatening the profitability of taxi business?
After Uber and Grab entered the market, the amount of taxi licences issued was indeed affected by the rivalry.

“There are early signs of taxi weakness”, refer to the full article here.

For ComfortDelGro, the quantity of taxi licences were prone to fall since 2014.

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