|Trans-Cab promo rates applicable for one-man operations only|
|Model||Taxi Age||Promo rates ($/day)||Usual rates ($/day)||Reduction|
|Toyota Wish||5-8 yrs||68.48||96.30||-28.9%|
|Chevrolet Epica||3-4 yrs||85.07||108.07||-21.3%|
|Chevrolet Epica||4-5 yrs||79.72||102.72||-22.4%|
|Chevrolet Epica||5-6 yrs||77.58||100.58||-22.9%|
|Renault Latitude||>3 yrs||94.70||121.98 -133.75||-25.9%|
Credit Suisse, noting investor concerns about the impact of price competition in the taxi industry, said Trans-Cab’s rate cuts are more limited than what headlines in the media last week suggested.
It highlighted that:
1. Rather than a broad-based reduction in rates, the cuts are limited to older vehicles and are largely for the less popular Wish and Epica models.
2. The discounted rates are only applicable for one-shift taxis.
3. Rates for the bulk of the fleet remain unchanged, with rates for the Renault Latitude (main model) at $122-$134/day.
4. This would imply that reductions in overall average fleet rental rates of Trans-Cab are only in the low-mid single digit range.
5. In recent months, ComfortDelGro has rolled out rental discounts of 50-60% for the first six months, but only for new drivers operating strictly on one-shift.
6. The revenue impact from the promotion is limited, considering that one-shift drivers are only 20% of ComfortDelGro’s taxi fleet, and its near-100% hire-out rate and negligible driver attrition.
6. ComfortDelGro has no intention to start a price war given its c.99% hire-out rate, choosing instead to continue its fleet renewal strategy.
With the advent of Uber/Grab, we expect a continued bifurcation of the taxi industry, where the scale advantages and network effect of ComfortDelGro’s dominant 61% market share becomes more apparent. This is evidenced by ComfortDelGro’s c.99% hire-out rate vs that of Trans-Cab at 89%.
We continue to like ComfortDelGro for its earnings resilience and potential upside to dividends in its FY16 results, and believe the market has not priced in ComfortDelGro’s recent acquisition of the remaining 49% stake in its Australian bus subsidiary, which is expected to add 4.8% to ComfortDelGro’s FY17E PATMI if approved. Maintain OUTPERFORM.