ComfortDelGro reiterated in its announcement on Feb 17 that it “will take a “zero-tolerance” policy towards any kind of fraud and wrongdoing.”
A spokesperson from A2B also states that they do not tolerate fraudulent behaviour and takes action against drivers engaged in misconduct. The company has also cooperated with authorities when required, ensuring that fraudulent activities are identified and addressed.
In a Feb 17 note, DBS Group Research has kept its positive view on ComfortDelGro despite this negative news. “Public relations nightmare given headlines, but [the] financial impact could be immaterial.”
DBS does not believe that the issue stems from corporate fraud but instead stemmed from drivers exploiting loopholes. Additionally, the taxi drivers seem to have benefitted more from this as A2B only receives 4% in fees from these transactions.
Given A2B’s low revenue exposure from these fraudulent transactions, DBS maintains that “A2B remains a legitimate business with continued earnings growth potential.”
The profitability of ComfortDelGro Group also remains promising given the strong recovery in the UK's bus industry and their acquisition of Addison Lee, a UK-based transport company.
“Despite the negative headlines, a potential share price dip could present an attractive buying opportunity,” DBS states. DBS has maintained its ‘buy’ call with an unchanged target price of $1.80 and said it will continue monitoring developments.
As at 11.30am, shares in ComfortDelGro are trading 2 cents lower or 1.45% down at $1.36.
