It was surprise that Singapore’s main taxi service provider ComfortDelgro raised its taxi booking commissions by 2ppt to 7% wef 1 Jan 2024 despite competition from peers, while making the existing 10% rental waiver permanent for its drivers.
Last month, it also announced that it is acquiring taxi network operator A2B Australia for AUD165.1m. Investment house, Maybank said it is generally positive on both moves and have raised its FY24-25E EPS by 2- 3%, mainly due to higher Taxi EBIT contribution. Retain BUY with a higher DCF-based TP of SGD1.60 (8.3% WACC and 0.5% long-term growth).
Acquires leading Australian taxi network provider
On 22 Dec 2023, CD said it will acquire all shares in A2B Australia (A2B AU, CP AUD2.14, Not Rated) that it does not already own via a scheme of arrangement, in which the group will pay AUD1.45/share in cash. This excludes A2B’s payment of an AUD0.60 special DPS from its sale of certain properties, expected to be paid out on 30 Jan 2024. A2B has over 8000
vehicles in its national network and is also a major technology & payment solutions provider for the personal transport industry. Its offerings include taxi services brands 13cabs and Silver Service, a taxi and booking dispatch platform, MTI, and the Cab charge payment solution.
Scaling up its P2P mobility business in Australia
CD and its Australian subsidiary Swan Taxis now hold about 9.3% of A2B. It will cost AUD165.1m to buy the remaining shares in A2B, to be funded via existing cash and bank facilities. Management believes the deal is complementary to its Australian business and is in line with the group’s strategy to scale its point-to-point (P2P) mobility business in the country.
Upon completion in 1H24, this will add c2% to its bottomline on a full year basis. However, the house said it has not factored the incremental contribution into assumption as the transaction is still subject to approval from A2B’s shareholders, an Australian court and clearance from the Australian Competition and Consumer Commission, etc.
Increased taxi booking commissions to 7%
Meanwhile, CD recently raised its booking commission to 7% (from 5% previously) wef 1 Jan 2024, while making the existing 10% rental waiver permanent for its drivers. The higher taxi revenue should help to more than offset the rising cost of maintaining and upgrading technology systems, as well as financial charges for cashless transactions. Maybank expects its Taxi & Private Hire segment to continue to grow as demand for P2P trips stays firm on recovery of inbound tourism to Singapore, especially from China with implementation of the 30-day mutual visa free entry
