Analysts at DBS Group Research are keeping “buy” on ComfortDelGro (CDG) with a target price of $1.80 following the announcement for an industry-wide increase in platform fees effective Jan 1, 2025.
The four main Singapore ride-hailing operators — CDG, Grab, Gojek and Tada have announced increase in platform fees, which ranges from 20 cents to 50 cents. CDG will be increasing its Zig app booking platform fee from a flat 70 cents to $1-$1.20, based on travel distance and travel time.
The hike is expected to defray the higher costs attributable to the implementation of the Platform Workers Act, effective Jan 1, 2025, DBS points out. Under the act, the main additional costs for platform operators would be the mandatory employer Central Provident Fund (CPF) contribution for workers.
DBS believes the increase will be a net profit neutral for CDG, with the increased revenue from platform fees offset by higher employer CPF contribution costs.
“Nonetheless, we believe CDG could benefit from the improved pricing landscape. Given the significant platform fee increase by Tada and commission fee waiver by CDG, we believe the playing field would likely be more even going into 2025, [for instance], Tada might not be as price competitive,” the analysts say.
Accordingly, the analysts believe CDG is well-positioned to grow its bookings and market share, which could translate into longer term profitability growth.
See also: RHB stays ‘neutral’ on telco sector amid fierce SIM-only competition
As at 9.02am, shares in CDG are trading 1 cent higher or 0.7% up at $1.45.
