Land Transport – DMG

New Taxi availability standards

We expect minimal impact to operators. LTA has announced new taxi availability standards to be implemented from 1 Jan 13. This will involve having taxi availability during peak periods (For 2013: 65% of taxis on the road from 6am-7am, 11pm-12am, and 70% from 7am-11am, 5pm-11pm), as well as general availability throughout the day (70% of taxis with minimum daily mileage of 250km). Any financial penalty implemented could begin from Jun 13 onwards. We believe the impact on operators will be minimal: (1) ComfortDelGro (CD) has high chance to have already met criteria with currently 80% of its fleet running on two shifts with average daily taxi mileage of 400km, while (2) SMRT’s fleet, of which less than 50% is running on two shifts could benefit from LTA’s measures to complement taxi availability. Maintain BUY on CD with TP of S$1.85 and NEUTRAL on SMRT with TP of S$1.60. We prefer CD on the back of overseas expansion potential and cheaper valuations with CD trading at 13x FY13 P/E compared SMRT trading at 19x FY13 (FYE Mar) P/E.

CD likely to have already met new Taxi availability standards. CD currently has 80% of its fleet running on two shifts compared to 50% for Singapore’s overall taxi fleet. During peak hour periods, it is likely that percentage of its taxis on the road averages above 90% (compared to the 65-70% LTA requirement for 2013). With a high percentage of its fleet running on two shifts (implying likely longer hours on the road), its average daily mileage per taxi currently stands at 400km (versus the required 70% of taxis with min. daily mileage of 250km for 2013). As such, we believe CD would likely meet the standards set by LTA.

SMRT has room to benefit from LTA’s complementary measures. SMRT has less than 50% of its fleet running on two shifts (below Singapore’s overall 50% level). While this could imply a chance that SMRT is not meeting the minimum requirements set by LTA, we believe LTA’s measures to complement taxi availability such as (1) relaxation of CBD taxi pick up/drop off points, (2) online portal to aid matching between taxi hirers and relief drivers, and (3) discounts on Taxi Driver’s Vocational Licence renewal fee for “active” drivers, will help improve average daily mileage as well as more conversions towards double shifts.

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