Category: ComfortDelgro
ComfortDelgro – BT
Taxis to add 30-cent diesel surcharge per ride from Thursday
COMFORTDELGRO will introduce a diesel surcharge of 30 cents on the cost of all taxi rides from next Thursday due to rising diesel prices, and yesterday’s announcement by the market heavyweight led to SMRT Taxis following suit. ComfortDelGro operates the biggest fleet of taxis in Singapore with about 14,000 vehicles, or almost two-thirds of the total 22,000-plus cabs. SMRT is No 2 with about 3,000 taxis.
ComfortDelGro said that in the last six months, the net pump price of diesel here has risen by more than 50 per cent to $1.83 a litre on the back of all-time high global oil prices.
‘For the last six months, we have been absorbing a large part of the increase in diesel costs so that our drivers can enjoy a low rate of just $1.19 per litre of diesel,’ said Yang Ban Seng, CEO of the land transport giant’s taxi business. ‘But even at this subsidised rate, our drivers are still paying about 40 per cent more than what they were paying six months ago before the fare revision and the indications are that oil prices will continue to remain high.’
ComfortDelGro, which sells diesel to its drivers, said it incurred a $6.3 million loss on such sales in the first three months of the year alone. The company added that the diesel surcharge will increase drivers’ incomes by $9 per day, assuming each taxi makes about 30 trips daily. The surcharge, which will go to the driver, is a temporary measure to offset surging diesel costs. It will be removed when diesel prices fall back to $1.19 per litre, the market price on Dec 17, 2007.
Even CNG-powered taxis are likely to tack on the 30-cent surcharge. Smart Automobile, which has 180 cabs that run on compressed natural gas (CNG), said this is because the price of CNG has also risen as it tracks the price of high sulphur fuel oil. ‘The price of CNG is currently $1.59 per kg, before a 12 per cent discount for our drivers,’ said managing director Johnny Harjantho, whose subsidiary Smart Energy operates a CNG refuelling station. ‘In February, it was only $1.28 per kg.’
Smart, which also has about 650 diesel taxis, is one of two operators of CNG taxis, along with Prime Taxis. They will be joined later this month by SMRT, which will roll out Hyundai Azera CNG cabs.
Transport – BT
Through fare adjustment may negate fare hike
Transport firms cleared to apply for bus, train fare increase of up to 3%
PUBLIC transport operators’ (PTOs) revenues may be hurt despite a fare review that allows a maximum fare adjustment of 3 per cent for 2008 because of the introduction of distance-based through fares.
Yesterday, the Public Transport Council (PTC) announced that public transport operators can apply for an increase in bus and train fares of up to 3 per cent. This was arrived at after a review of the fare adjustment formula, which PTC has tweaked slightly.
The formula, unveiled in 2005, is pegged to three macroeconomic factors – the consumer price index (CPI), the average monthly earnings (WI) and the productivity extraction, which is a measure of productivity gains.
The original formula was 0.5 (change in CPI) + 0.5 (change in WI) – 0.3 per cent, where 0.3 per cent was the productivity extraction from 2005 to 2007.
For 2008-2012, PTC says the relative weights for changes in CPI and WI remain unchanged but the productivity extraction component is now 1.5 per cent. So the new formula is 0.5 (change in CPI) + 0.5 (change in WI) – 1.5 per cent.
PTC also announced that as part of the Land Transport Masterplan, distance-based through fares will be introduced to facilitate more seamless transfers on the public transport system.
Currently, a commuter who transfers between buses, or between bus and MRT, incurs a ‘transfer penalty’ when taking the subsequent vehicle because of the additional ‘boarding charge’.
But with the introduction of through fares, this penalty – about 35 cents now – will be reduced in two stages over 2008 and 2009, and commuters will only have to pay for the extra distance travelled.
The aim is to avoid penalising commuters who make transfer journeys, which can be faster than a single direct trip, and give them more route choices.
But depending on how PTC apportions the cost of reducing this ‘transfer penalty’ between operators and commuters, it may affect the bottom line of the two listed PTOs – SBS Transit and SMRT Corp. That will only be known in September because the PTOs have to first submit their applications for a fare hike in August. PTC will make known its decision in September, and the new fares will take effect in October.
Through fares could result in lower fare revenues for the PTOs and negate some of the benefits from a fare increase, says one industry analyst.
‘Even with a fare hike, the through fare adjustment may neutralise any potential revenue increase for the transport operators,’ he says.
He adds that it all depends on how many commuters start making transfers. Based on current travel patterns, four in 10 adult EZ-Link commuters make transfer journeys on a weekday. That number is expected to rise significantly with the introduction of through fares.
‘Under the new system, people who make transfers may pay lower fares, while those who don’t make transfers will pay more because of the 3 per cent fare increase,’ says the analyst.
‘Total fare revenues will depend on how many commuters make up each group.’
But there could be a silver lining in all this. He says: ‘While this may not seem like good news initially, lower fares could attract more people to use public transport, thus increasing the overall ridership and fare revenues.’
ComfortDelgro – BT
Comfort DelGro unit to acquire Custom Coaches
Deal will give it 35 per cent share of the Australian bus building market
COMFORTDELGRO Corporation’s Australian subsidiary, ComfortDelGro Cabcharge (CDC), has entered into a memorandum of understanding for the acquisition of bus builder Custom Coaches, which will give CDC a 35 per cent share of the Australian bus building market.
CDC was set up in 2005 as a joint venture between ComfortDelGro and financial services provider Cabcharge Australia.
The proposed acquisition will act as a base for the group when it opens its new manufacturing plant at Rutherford, Hunter Valley in early 2009.
The acquisition is subject to due diligence, which is expected to wrap up in about a month’s time.
‘If this goes through, it will help us get a foothold until the building plant goes into operation,’ said ComfortDelGro spokesperson Tammy Tan.
Custom Coaches has bus building factories for fabricated stainless steel buses in Sydney, Adelaide and Gold Coast.
About 44 per cent of the group’s turnover currently stems from its overseas operations.
However, the group had stated earlier this year that is targeting 70 per cent of total turnover to stem from overseas operations within five to seven years.
Since its formation, ComfortDelGro, the world’s second largest land transport company, has adopted an aggressive overseas expansion strategy and currently has operations in seven countries – Singapore, China, the United Kingdom, Ireland, Australia, Vietnam and Malaysia.
Rising fuel costs caused the group’s net profit for the first quarter ended March 31 to drop 9.4 per cent to $50.2 million.
Revenue increased 5.8 per cent to $753.5 million, on the back of strong contributions from both its local and overseas operations.
ComfortDelGro’s Q1 earnings per share was 2.41 cents, down from 2.67 cents last year.
First-quarter turnover for the bus business rose 5.7 per cent to $378.6 million due to higher contributions from the group’s operations in Australia and China.
Overseas bus operations accounted for 59 per cent of total group bus turnover.
ComfortDelGro MD and group CEO Kua Hong Pak had said previously that the ‘various operations around the world remain sound, with most showing good growth at the top line’.
ComfortDelGro shares closed at $1.47 each yesterday, up by three cents.
ComfortDelgro – CIMB
Growth from overseas
• Fuel concerns. While costly fuel is a concern for regulated public-transport companies like CD in Singapore, CD is able to pass through higher fuel costs in its overseas bus operations. Domestically, an application for a fare hike has been made. We also expect a review of diesel subsidies for its Singapore taxi operations.
• Public transport ridership is up. Escalating petrol and diesel prices, more ERP gantries as well as increased ERP charges are forcing more private cars owners to take public transport. Monthly ridership for both rail and bus is encouraging, reflecting a positive shift in commuter behaviour towards public transport.
• Overseas business to drive the group. Management aims to raise its overseas revenue from 50% to 70% within the next 5-7 years. With this new target, we could reasonably expect growth to be spurred by possible M&As, as well as organic growth of its bus operations in the UK, Australia and China, supported by taxi operations in the UK and China.
• Forecasts and target price cut; but maintain Outperform. We lower our FY08-10 core net profit forecasts by 6-17% to factor in much higher diesel prices. However, dividend yield is attractive at 6% and valuations appear reasonable. Our DCF valuation prices the stock at S$2.09 (previously S$2.32) using an unchanged WACC of 9.3% and terminal growth rate of 2%.
ComfortDelgro – UOBKH
Share-swap to result in S$26.5m exceptional gain. Maintain HOLD
Share-swap to result in one-time gains. ComfortDelgro Corporation (CD) announced that it will transfer 16% of its subsidiary, CityFleet (UK), to Cabcharge (CAB AU, Not Rated), in return of about 2.5% stake increase in the latter. This would result in a one-time gain of S$26.5m or an earning or NAV per share increase of 1.27 S cents in FY08.
The share-swap is to strengthen the relationship between CD and CAB for the future growth. CD conducted a similar share-swap exercise in Nov 2006, which also reported an exceptional gain at S$41.7m in FY06. These two companies set up a joint venture to acquire the Westbus group in 2005, which has strengthened CD’s presence in Australia. The Australia market contributed 7.6% of CD revenue in 1QFY08.
Maintain HOLD. We have incorporated the exceptional gain of S$26.5m into our FY08 earning forecasts, while still maintaining our core earning forecasts. Upside surprises could come from oil price corrections and CD’s overseas expansion.