"Investors should not be overly concerned, as ComfortDelGro’s diversified earnings base and scale in Singapore’s taxi market provide resilience, while Grab’s driver incentives are likely transitory.
"ComfortDelGro remains an attractive investment – given its stable core business, improving overseas margins, strong growth from acquisitions, above-market dividend yield, and solid sustainability progress," states Jaiswal in his June 25 note.
The initial fleet is small but under licensing requirements, GrabCab is to have 800 vehicles in three years.
Jaiswal acknowledges that in the short term, there will be stiffer competition for drivers, leading to potential declines in ComfortDelGro’s taxi fleet utilisation and rental income in the near term.
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Nonetheless, more significant growth in the form of expanding fleet sizes and margins can be seen from ComfortDelGro's overseas businesses, which accounts for around 40% in the most recent 1QFY2025.
"Its scale, the transitory nature of Grab’s incentives, street-hails’ small 10% share of rides, a potential expansion of the driver pool due to GrabCab’s launch, and supportive regulatory measures should further mitigate risks," reasons Jaiswal, who also flags that the company offers a FY2025 yield of 6%.
ComfortDelGro shares changed hands at $1.43 as at 9.31 am.
