ComfortDelGro shares surge in heavy trading on flat-fare plan
Comfort and CityCab vehicles on the road, both taxi companies belonging to ComfortDelGro Corporation Limited. TODAY file photo
SINGAPORE — ComfortDelGro shares surged to their highest level in more than five months on Tuesday (April 4), a day after Singapore’s largest taxi operator announced plans to introduce a flat-fare option next week.
The shares rose as much as 2.7 per cent to S$2.65, the highest since Oct 28, in heavy trading before closing at S$2.62, still up 1.6 per cent on the day. About 19.4 million shares worth more than S$51 millionchanged hands, making it the second most-actively traded counter by value on the Singapore Exchange after SingTel. Meanwhile, the Straits Times Index closed down 0.3 per cent at 3,179.06.
“The share price is reacting to the initiative by the company to offer flat fares,” said transport analyst Andy Sim at DBS Group Research, which has a Buy rating on ComfortDelGro stock with a target price of S$2.94.
“In recent times, there have been concerns that private car hires are affecting taxi operators, and the hired-out fleet to taxi drivers is decreasing,” he added, saying the new initiative could help boost the stock’s prospects as sentiment improves.
ComfortDelGro, which commands about 60 per cent of the taxi fleet in Singapore, said on Monday that commuters who make bookings for its Comfort and CityCab taxis may choose to pay a flat fare on these rides from next Monday. The new flat-fare option, which must be made through the ComfortDelGro mobile app, takes into account the distance to be travelled and computes a fare based on existing surcharges. Commuters who want to use the conventional metered-fare option may continue to do so.
“The new fare option is no doubt a reaction towards the disruptions within the taxi industry and the market’s response had been tellingly optimistic. Certainly, ComfortDelGro’s competitiveness is expected to improve with this development, which places the company on a more level playing field with new entrants in terms of fare transparency via app bookings,” said IG market strategist Pan Jingyi.
The new feature comes less than a month after the authorities gave the green light for taxi companies to introduce dynamic fares. ComfortDelGro said on Monday it is still considering whether to provide dynamic pricing — as other taxi firms have done — emphasising that it is “important to ensure that our street-hail customers are still being served.”
“While ComfortDelGro stated that they are still exploring dynamic pricing where the fares fluctuate according to commuter demand, we believe this move (flat-fare pricing) does help close the gap between ComfortDelGro’s fare structure and GrabCar/UberX’s fixed fare pricing structure, and consequently supports ComfortDelGro in its focus to retain existing hirers,” said analyst Eugene Chua from OCBC Investment Research, which reiterated its Buy rating on the stock with an unchanged fair value of S$2.95.
