ComfortDelgro made a major announcement yesterday that it would be buying over 51% of Lion City Holdings from Uber's car rental business. Lion City Holdings runs Lion City Rentals and own a fleet of about 14000 vehicles. ComfortDelgro's taxis and Lion City Rental's private-hire cars will now come under a centralised fleet management system using Uber's booking and dispatching technology.
Technical
Screenshot from Chartnexus. Downtrend supported by high volume spike.
Financials
Closing Price as at 8-12-2017 was $1.91. Current dividend yield is 4.08% as shown below. Although the DPU has been increasing over the past few years, the payout ratio has also been increasing. This means that they have been paying more and more out of their earnings. Would it be sustainable to further increase DPU moving forward?
Screenshot from Stocks.cafe.
Increasing Payout Ratio. Screenshot from SGX website
The Partnership
ComfortDelGro chief executive Yang Ban Seng called the partnership between CDG and Uber a "win-win" situation. I am not quite sure about that. If you are joining forces with a company that's making money, it's good. Uber lost $1.46 billion last quarter. Ouch! Source here. Would you do business with someone whose business keeps losing money? Unless ComfortDelgro is able to fix Uber's business where it went wrong. Let's look at what analysts and cab drivers think about the partnership from the article here.
My Thoughts
At a dividend yield of 4.08% per year, it's not attractive enough to make me invest in CDG as a longterm stock. There's still intense competition with Grab and I believe their overseas taxi business also face tough competition. Let's not forget potential future disruptions such as driverless cabs and taxi drones. Unless CDG revamp their taxi business model and embrace new technology fast, I will remain on the sideline for this company.
This comment has been removed by a blog administrator.
ReplyDelete