20140519-Maybank_KERPL-Win_some,_lose_some_in_taxi_shake-up_12页_473kb

Land Transport Market Analysis Summary

Core Content

This report analyzes the impact of new entrants on Singapore's taxi market, focusing on the potential effects on existing operators and the long-term outlook for the industry.

Main Points

• New Entrants:

  • New entrants with app-based business models are entering the Singapore taxi market.
  • These entrants are categorized into two models:
    • Model A: Companies that channel passenger traffic to existing taxi drivers (e.g., GrabTaxi, MoobiTaxi, EasyTaxi).
    • Model B: Companies that link passengers to limousines and private vehicles (e.g., Uber).

• Impact on Booking Income:

  • The potential loss of booking income is a key concern, but the analysis suggests that the impact on operators' profitability is minimal.
  • Even with a 20% decline in booking income, the loss would represent only 3.4% to 4.3% of ComfortDelGro's/SMRT's Singapore taxi EBIT.
  • This is a small proportion of the total profit for these operators.

• Long-term Benefits:

  • New entrants are expected to increase the overall revenue pool of the taxi industry by enhancing booking penetration.
  • The report estimates that the booking penetration rate could increase by 5 percentage points within three years, potentially boosting the industry's annual revenue pool by SGD52 million or SGD5.16 per taxi per day.
  • Operators may increase rental fees in response to higher revenues, which could offset any near-term losses in booking income.

• Operator Exposure:

  • ComfortDelGro (CDG) has the largest taxi fleet in Singapore and is most exposed to changes in the market. It is recommended to Maintain BUY with a target price (TP) of SGD2.40.
  • SMRT has a smaller taxi operation and is less exposed. It is recommended to Maintain SELL with a TP of SGD0.50.

Key Information

• Smartphone Penetration: Mobile penetration in Singapore was 156% as of Dec 2013, and smartphone penetration was 87% as of Jan 2014.
• Booking Penetration: Currently, only 10% of taxi journeys are completed via booking systems, with an expected increase of 5 percentage points within three years.
• Fleet Size and Market Share:
  • ComfortDelGro: 16,602 taxis (59.9% market share).
  • SMRT: 4,403 taxis (15.9% market share).
• Financial Overview (2013):
  • ComfortDelGro: Revenue of SGD892.4 million, EBIT of SGD96.0 million.
  • SMRT: Revenue of SGD131.8 million, EBIT of SGD6.5 million.
• Booking Income:
  • CDG: Estimated booking income in 2013 was SGD16.3 million.
  • SMRT: Estimated booking income in 2013 was SGD1.4 million.
• Booking Charge:
  • Current booking charge: SGD2.30 to SGD3.30 for normal taxi bookings, with higher charges for premium and advance bookings.
• Regulatory Considerations:
  • Model B entrants (e.g., Uber) face regulatory hurdles, including insurance coverage and service quality standards.
  • Model A entrants operate within existing regulations by channeling traffic to licensed taxi drivers.

Conclusion

• The taxi market in Singapore is undergoing a transformation due to the rise of new entrants.
• While booking income may be affected in the short term, the overall industry revenue pool is expected to grow, benefiting operators in the long run.
• ComfortDelGro is most exposed to these changes and is recommended to maintain a BUY rating, while SMRT is less exposed and should be sold.

Key Risks

• Regulatory Policy: If Model B entrants gain acceptance, it could disrupt the market.
• Market Evolution: Changes in business structures and profit distribution along the value chain may bring new risks.
• Power Shift: Existing players may face challenges from new entrants, but CDG's superior booking system and diesel concessions may help retain drivers.

Analyst

• Derrick Heng, Maybank Kepong Research

Research Offices

• Singapore: NG Wee Siang, Gregory Yap, Wilson Liew, Ong Kian Lin, James Koh, Yeak Chee Keong, Derrick Heng, Wei Bin, John Cheong, Truong Thanh Hang
• Malaysia: Wong Chew Hann, Desmond Ch'ng, Liaw Thong Jung, Ong Chee Ting, Mohsin Aziz, Lee Cheng Hooi, Tee Sze Chiah
• Hong Kong/China: Howard Wong, Alexander Lutzer, Jacqueline Ko, Karen Kwan, Osbert Tang, Ricky WK Ng, Simon Qian, Steven ST Chan, Warren Lau, William Yang
• India: Jigar Shah, Anubhav Gupta, Urmil Shah
• Indonesia: Wilianto IE, Rahmi Marina, Aurelia Setiabudi, Anthony Yunus, Isnaputra Iskandar, Pandu Anugrah, Janni Asman
• Philippines: Luz Lorenzo, Laura Dy-liacco, Love II Sarreal, Rommel Rodrigo, Katherine Tan, Ramon Adviento
• Thailand: Maria Lapi, Jesada Techahusdin, Kittisorn Pruittipat, Sittichai Duangrattanachaya, Sukit Udomsirikul, Mayuree Chowvikan, Padon Vannarat, Surachai Pramualcharoenkit, Suttatip Peerasub

Summary of Recommendations

• ComfortDelGro: Maintain BUY with TP of SGD2.40.
• SMRT: Maintain SELL with TP of SGD0.50.