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Monday, March 27, 2017

ComfortDelGro a ‘buy’ after dynamic pricing of taxi fares in S'pore gets the nod

By PC Lee / theedgemarkets.com.sg | March 27, 2017 : 5:39 PM MYT

SINGAPORE (March 27): OCBC is reiterating its “buy” on ComfortDelGro with a fair value of S$2.95 after regulators give the go-ahead for dynamic pricing of taxi fares.

On March 17, the Public Transport Council and Singapore’s Land Transport Authority (LTA) said they have no objections to the proposals by taxi companies on introducing dynamic pricing of taxi fares.

This means when commuters book a taxi through a mobile app, they will have an additional option to choose either taxi fares based on dynamic pricing or the current metered fares.

In a Monday note, lead analyst Eugene Chua believes this move will further level the playing field between taxi companies and private hire car service providers in Singapore.

Already, five other taxi companies operating more than 10,600 taxis in total have partnered with Grab to offer the dynamic pricing fare option through the new JustGrab function in the Grab mobile app.

This new dynamic pricing in JustGrab uses the same fare structure as GrabCar private hire car service. This means without surcharges, the fixed fare will be cheaper than taxi metered fares but the pricing may be higher depending on demand.

“As Grab will dispatch the nearest taxi or private hire car to a commuter using JustGrab, we believe this will greatly dilute the market for GrabCar drivers with the influx of taxis offering same fares,” says Chua.

This development is positive for ComfortDelGro as it will increase its ability to retain existing hirers, adds Chua, assuming a decline in GrabCar drivers over time, especially after private hire car driver licensing rules kick in by 2H17.

Shares of ComfortDelGro are down 3 Singapore cents at S$2.49.

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