ComfortDelGro - DBS Research 2024-03-11: 3 Reasons For A Share Price Re-rate

• We reiterate our positive view on ComfortDelGro (SGX:C52) for three key reasons, with continued earnings recovery and earnings upgrade by market consensus underpinning a further re-rate.

Why do we believe ComfortDelGro has more leg room to run?

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• the worst being over for the public transport segment; and
• sensible bolt-on acquisitions to drive future growth.

1) Multiple levers in a growing Singapore P2P market

• We reiterate our prior view that the market’s view on the group’s taxi fleet as a profitability trend could be missing the picture. The shift towards commission sharing provides multiple levers for its taxi business to enjoy upsides, namely from fare increases, a higher number of rides, and higher proportion of ride hailing vs street hailing.
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• inspection frequency for taxis under three years old to be reduced from biannually to annually.

In 2023, overall industry sales growth of +7.4% was driven by ridership growth (taxi and ride-hail) of +4.1% and average fare growth of +3.3%.

In 2024F, we project overall growth of +6% on a +3% ridership growth and a +3% pricing effect.

Beyond 2024, ComfortDelGro has been working on new features for its Zig app, amongst which is an auction mechanism. We believe this feature could be similar to InDrive, where passengers are able to quote their fare and nearby drivers could accept, decline, or counter. This would ensure more transparency and fairness in terms of fares vs an algorithm-driven black box, promoting healthy growth for the industry.

2) Worst is mostly over in the public transport segment

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Zheng Feng CHEE DBS Group Research | Andy SIM CFA DBS Research | https://www.dbs.com/insightsdirect/ 2024-03-11 SGinvestors.io

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