ComfortDelgro takes a breather as LTA tightens regulations for ride-hailing firms
The agency is eyeing to ban driver exclusivity arrangements to spur domestic competition.
Singapore’s transport authority is proposing to license ride-hailing platforms such as Grab and Go-Jek, in a bid to tighten its oversight of the sector. According to a statement by the Land Transport Authority of Singapore (LTA), ride-hailing apps provide the same services as taxi operators, yet they do not face the same oversight as these players.
LTA announced its plans to reduce business and regulatory costs whilst ensuring that regulations are appropriate for transport services in Singapore. One of its proposals aimed at prohibiting driver exclusivity arrangements for ride-hailing apps that stop drivers from working for other operators. The agency said that this could lead to market domination of the big players, and it can also prevent new operators to make a dent in the market.
According to DBS Equity Research, this move may bode well for taxi operators such as ComfortDelGro who have experienced heightened concerns following the rise of private hire car companies and Go-Jek’s entry into the Lion City’s transportation market.
Likewise, the agency also proposed to license point-to-point (P2P) operators including all ride-hail operators in an effort to protect commuters and drivers.
“Whilst the new regulations are not firm, the direction of this move to harmonise the regulations seem to be positive and long-awaited,” DBS analyst Andy Sim said. “We understand that taxi operators have indicated that they are subjected to more stringent regulations and costs, vis-a-vis private hire vehicles.”
“This development should bode well for the company’s taxi operations,” Sim highlighted in the report. “Our view is also supported by our expectations that ComforDelGro will deliver YoY earnings growth in Q4 2018 and FY 2019.”
Also read: Is the worst over for ComfortDelGro?
The potential growth in earnings is attributed to a bottoming out in taxi fleet contraction in Singapore, higher earnings contribution from ComfortDelGro’s acquisitions and the 4.3% public transport fare hike which took effect on 29 December 2018.
LTA’s main objectives in its proposals were to maintain an open and contestable market, provide sufficient regulatory oversight and streamline regulations to keep business and regulatory costs low, the agency highlighted in a statement. The public consultation on the proposed changes will be open for feedback until 21 February.