ComfortDelGro Corporation: New Competitor Enters, But Solid Growth Ahead

UOB Kay Hian | April 4, 2025

Grab Enters Singapore’s Taxi Market, Increasing Competition

It was announced that Grab, a major ride-hailing platform, will be entering Singapore’s domestic street-hail taxi segment as the country’s sixth taxi operator. This move will increase competition for incumbent players like ComfortDelGro Corporation (CD), which currently holds around 65% market share.
While GrabCab’s entry may lead to a slight decline in taxi utilization rates and margin compression for CD’s taxi business, the overall impact is expected to be manageable. CD’s strong earnings growth and attractive 5.8% dividend yield for 2025 make it a compelling investment, in our view.

Potential Taxi Driver Shifts to GrabCab

We expect some taxi drivers from incumbent operators to switch over to GrabCab, attracted by its larger digital platform and potential incentives like lower rental rebates. Larger players like CD, with a strong online presence through their Zig app, will be less affected by this.
Overall, we anticipate taxi rental utilization to fall for incumbents as GrabCab gradually ramps up operations, likely starting in early-2H25. This could result in margin compression for CD’s taxi segment, which currently has operating margins of 18-20%.

Inorganic Growth to Support Taxi Segment

For 1Q25, CD’s taxi segment is expected to face stiff competition from ride-hailing peers, including new entrants Geolah and Trans-Cab. This may lead to lower completed bookings and drag down commission income. However, full-year contributions from the A2B and Addison Lee acquisitions are expected to support the taxi segment’s growth.

UK Bus Business Margins Continue to Improve

CD’s UK bus contract renewals are ongoing, which should lead to better margins in 2025. Tender bid margins are expected to remain in the 10-15% range, and we believe CD’s UK bus margins will gradually trend upwards towards the high single-digit to low-teens percentage in the medium to long term.

Maintain BUY with S\$1.76 Target Price

We maintain our BUY recommendation on CD with an unchanged target price of S$1.76, pegged to the stock’s 5-year average long-term PE of 16x 2025 earnings. CD’s decent 5.8% dividend yield for 2025, coupled with strong earnings growth from the taxi segment and improving UK bus margins, provide a compelling investment case despite the near-term competitive pressures.
Key catalysts include successful bus tender contract wins, increases in taxi commission rates, and earnings-accretive overseas acquisitions.