SINGAPORE (July 10): Phillip Securities Research is keeping its positive outlook on the land transport sector as the storm appears to have blown over for the taxi industry.
“We believe the worst is over for the taxi industry, in view of the positive impact following the exit of Uber and resultant restructuring of the ride-hailing industry,” says analyst Richard Leow in a report on Monday.
While the taxi population continues to contract, Leow points out that the rate of decline shows sign of bottoming.
The taxi population fell nearly 19% year-on-year to 21,237 in May 2018, from 26,172 a year ago. However, this was just a 0.9% month-on-month dip compared to the preceding month of April.
Moreover, the deadline for attaining the Private Hire Car Driver's Vocational Licence (PDVL) has lapsed as at end-June, with only about 22,000 drivers, or 51% of applicants, having passed the test.
Private-hire drivers were required to pass the PDVL test to continue providing the chauffeur services.
“In addition, the lower number of actual PDVL holders is likely to exacerbate the oversupply of rental cars,” Leow says. “We expect the rental cars population to contract in the coming months.”
As such, the brokerage is maintaining its “accumulate” call on ComfortDelGro Corporation with an unchanged target price of $2.69.
However, Leow warns that ComfortDelGro might face challenges down the road with new ride-hailing players coming to the market.
“We are cautious over a resurgence of cheap fares and more driver incentives, which would negatively impact the demand from taxi hirers and passengers,” Leow says.
“Further regulatory action that undermines the nascent recovery in the taxi industry would also make us turn negative on the sector,” he adds.
Shares of ComfortDelGro closed 5 cents higher, or up 2.2%, at $2.37 on Tuesday.
