ComfortDelGro taxis face rough road ahead

Operating conditions are poised to deteriorate as private hire cars increase.

Even with ComfortDelGro's good performance in its taxi segment for the past year, there is no stopping the deterioration the whole taxi industry will be subject to this year.

According to UOB KayHian, ComfortDelGro's utilisation of 98.6% seen in 2016 could slump further this year as operating conditions deteriorate. UOB argued that the supply of private hire cars are increasing, leading to
pressure on taxi rentals.

"Peers such as SMRT are already offering flexible hours rental schemes for taxis at lower rates. CD has implemented revenue sharing schemes since Nov 16 and we think this could eventually result in an overall reduction in average taxi rental," UOB noted.

With this, UOB reduced its net profit forecast for ComfortDelGro taxis by 7 to 10%.

"Looking ahead, we have reduced our assumptions on fleet growth (0% vs 1.5% previously in 2017), taxi rental (-2.5%) as well as a lower utilisation rate (to 97% vs 99% previously) to reflect the concerns discussed above," the firm explained.

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