Why Comfortdelgro Investors Should Run for Their Lives! SG Wealth Builder Membership Sgwealthbuilder February 1, 2018 Stocks Comments

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Why ComfortDelgro investors should run for their lives! SG Wealth Builder Membership sgwealthbuilder February 1, 2018 Stocks Comments

Once upon a time in Singapore, taxi drivers held commuters to ransom with their ridiculous surcharges, bad practices of taking longer routes to earn higher fares and going ‘MIA’ during peak hours. Suffice to say, in every industry, there will always be black sheep. But the emergence of Grab and Uber have changed the game and levelled the playing field. Among the biggest casualty from this fall-out had to be ComfortDelgro, the largest taxi operator in Singapore.

The irony about ComfortDelgro is that as a taxi operator, it derives the bulk of its revenue from bus and MRT businesses, instead of its taxi business. With the Sharing Ranked Top 75 Singapore Investment disruption in the taxi landscape, perhaps in no time, ComfortDelgro may consider Blog by Feedspot switching its taxi drivers to bus or train drivers. This scenario may become a reality due to a frightening competitive advantage of Uber and Grab – they are both relatively asset-lite companies. Read on to find out why this spell big trouble for this Singapore blue chip.

Horror ride for Comfort Search … Search The evolving on-demand transport landscape is indeed sweet revenge for commuters as taxi operators had monopolised the market for the longest time due to lack of Email notification credible taxi alternatives. A lot of credit must be given to the Minister for Transport, Khaw Boon Wan for democratizing the private-hiring industry. Under his helm, the If you are not ready to join as member, you may opt to enter your email address to receive Land Transport Authority kept its promise of adopting “light touch” approach in notifications of new posts by email. Note that regulating private-hire car services. you can only view excerpt of the articles as Top 10 articles non-member. The biggest misconception of Grab and Uber is their business model. At the core, Grab Join 2,986 other subscribers Why ComfortDelgro investors should run for and Uber are not taxi operators, but technology companies. Their product offering is their lives! basically the provision of digital booking system. Due to this, both Grab and Uber are Email Address 7 reasons to sign up SG Wealth Builder not burdened by asset depreciation, legacy issues and regulatory baggage. The same Membership cannot be said for ComfortDelgro. Subscribe

According to the FY2016 financial report, ComfortDelgro had a combined fleet of Recent Comments 16,822 Comfort and CityCab taxis. While the large taxi fleet gave ComfortDelgro an Random Posts unassailable competitive edge, it is also a double-edged sword. Being the biggest taxi Wilson Yap on Contact OCBC Bank stock price crashed to six year operator, it is not nimble enough to adapt quickly to the fast-changing environment. It low sgwealthbuilder on Contact was only in end 2017 that the taxi operator entered into partnership with Uber to January 25, 2016 sgwealthbuilder on Contact develop new product offerings like Uberflash. Such development would lead to win-win One of the largest local banks in Singapore, OCBC […] wong chin kheng on Contact situation for commuters and taxi drivers because of increased efficiency – commuters spend less time waiting and drivers spend less time driving around looking for fare. But Wilson Yap on Contact Record Bankruptcy for US City, Detroit for ComfortDelgro, this sort of collaboration is so long overdue. August 8, 2013 This article is extracted from BullionStar, a Recent Posts […]

Why ComfortDelgro investors should run for their lives! Authentic gold in Singapore May 23, 2015 Is M1 a falling knife? Below is a piece of editorial from BullionStar, a Light at end of tunnel for ST Engineering? […]

Sembcorp Industries Ltd Silver Market Review for 2015 Legend of United Overseas Bank (UOB) December 9, 2015 Festive season is fast approaching and now is As a large company, it is not easy for ComfortDelgro to change its taxi leasing fee, the time […] Categories fares and operating costs. Replacing its booking system and other equipment is also Blog updates (15) not an option because of the prohibitive cost. And then there are maintenance costs Why you should not quit without a job in and repairs for the vehicles. In fact, ComfortDelgro spent $191.4 million on Singapore Book review; investment (11) June 13, 2014 maintenance costs in the nine months ending September 2017. Book review; Property investment; Singapore Recently I read that one of the fellow bloggers market; housing prices (3) The changing trend underlies an ominous destiny for ComfortDelgro. Firstly, flagging of has […]

Career management (32) taxi at the road side will become a thing of the past in future. Secondly, ride-sharing means that car owners can earn side incomes by becoming part-time Uber or Grab Career management; Book Reviews (1) Archives drivers. This means that the demand for taxi will continue to drop in the coming years Career management; investments (6) ▼2018 (11) while private hiring is expected to soar. Sound bad, huh? Entrepreneurship (15) ▼February (1) For the latest financial results, ComfortDelgro continued to struggle. Third quarter Forex; Trading (3) Why ComfortDelgro investors should revenue decreased by $24.0 million or 2.4% to $991.4 million in the face of strong run for their lives! Gold (47) competition. Net profit attributable to shareholders decreased by $7.2 million or 8.2% to ►January (10) Gold; Bitcoins (2) $80.1 million for the quarter ended 30 September 2017. For the nine months to 30 September 2017, net profit attributable to shareholders declined by a smaller 1.6% to Gold; Book review; investment (1) ►2017 (114) $242.0 million. Gold; career management (1) ►2016 (155) SBS Transit to the rescue Gold; currency (12) ►2015 (121)

Gold; portfolio management (23) Is it the end-game for ComfortDelgro? Not really. The saving grace is that management ►2014 (103) is prudent enough to expand into overseas markets and diversify its revenue sources Gold; silver (31) ►2013 (119) through different business segments. For 3Q17, overseas businesses contributed Insurance coverage; medical shield; financial 44.8% of group operating profit. SBS Transit, a listed company, is a subsidiary of ►2012 (78) planning; personal finance (20) ComfortDelgro. Vicom, another SGX-listed company, is another subsidiary. Both ►2011 (8) Investment; SGX stocks; Equities; Stock subsidiaries helped to offset the decline in the taxi business. trading (6) ►2010 (8)

Investment; SGX stocks; Yongnam; Stock Widely perceived to be a taxi operator, not many Singaporeans realize that trading (1) ComfortDelgro also has a public transport services business. In fact, SBS Transit Investments (14) revenue from bus and rail operations help to cushion the impact of the decline in taxi business. The good showing from SBS Transit was largely attributed to government make money (11) grants and the new Bus Contracting Model (BCM). Money management; personal finance (24) In 2012, Singapore government used $1.1 billion to launch the Bus Service Money management; personal finance; Enhancement Programme (BSEP). The fund was used to purchase 1000 buses to Investment (13) increase capacity. Subsequently, BCM was rolled out to lease SBS Transit’s existing Money management; personal finance; fleet of close to 2,900 buses to LTA. In consideration of SBS Transit using its existing relationship (21) fleet for the provision of the bus services, LTA will pay it a leasing fee based on the Parenting (6) depreciation of the buses over the statutory lifespan. With so much assistance from personal finance (44) the government, it is no surprise that SBS Transit reported glowing financial results. Personal finance; saving accounts; bonuses; For nine months ending September 2017, profit after tax for SBS Transit was $34 financial planning (2) million, an increase of 47.1% year-on-year. In fact, business from the public transport Property investment; (8) services was so good that revenue for 3Q17 was $601.5 million, more than double that Property investment; Singapore market; (25) of the taxi business.

Property investment; Singapore market; ComfortDelgro also has other business segments like Automotive Engineering, housing prices (16) Inspection and Testing Services, Driving Centre, Car Rental and Leasing and Bus Property investment; Singapore market; Station. However, the revenue from these business segments do not contribute private housing prices (8) significantly to Comfort’s revenue. The biggest contributors are mainly from bus, rail Property investment; Singapore market; and taxi service businesses. private housing prices; imoney (2)

Retirement (8) Financial position salaries (7) The balance sheet looks fairly healthy but has weakened for the past year. For nine

Self improvement (37) months ending September 2017, the asset depreciation amounts to a whopping $307.8 million. As ComfortDelgro owns the biggest taxi fleet in Singapore, this sort of Stocks (225) depreciation weighs on the balance sheet. Trading (9) While the vehicles can be a form of asset, in the fight against Uber and Grab, this can Uncategorized (20) also be a huge liability. This is because Uber and Grab are predominantly technology company. They can choose not to purchase vehicles and adopt an asset-lite balance sheet so that they will not be subjected to the cost of depreciation. ComfortDelgro does not have this sort of luxury.

Nonetheless, the situation is not so bad at the moment. Cash and cash equivalents were $538.1 million as of September 17, a decrease from $779 million last year. The company was in net cash position, at $188 million, a big drop from $434.2 million. Cash generated from operating activities was $190.6 million for 3Q2017. Henceforth, the business is still generating good level of cash currently.

Conclusion

Once a mighty blue chip, ComfortDelgro is at a cross-road. The devastating effect brought forth by technology means that it has to re-invent itself or risk becoming obsolete. SingPost and SPH both face similar situation as technology threatens to upstage their business models. The prospect is indeed grim as management had already tried its best to mitigate the risk by venturing into overseas markets and expanding revenue sources. But at the end of the day, technology still rules.

Share price plunged from a high of $3.21 in 2015 to the current $2.10. Given the company’s prospect, it would take a very brave investor to enter this counter. Make no mistake, cheap does not translate value. For all you know, this could be the start of a slippery slope for ComfortDelgro. Is there any way out? I don’t have the answer but the management must figure it out fast as time is running out. Till then, enjoy the ride.

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