ComfortDelGro shares jump on news of possible tie-up with Uber

SINGAPORE — The share prices of ComfortDelGro — the Republic’s largest taxi operator — surged on Wednesday (Aug 23), a day after it announced that it is in talks with ride-hailing giant Uber for a potential strategic alliance.

The shares rose as high as 11 per cent to S$2.41 in morning trade, and closed at S$2.36, about 8.8 per cent higher than the previous day’s close. 

Some 56.2 million shares changed hands on Wednesday, making the company’s shares among the top three counters most actively traded.

The share price had fallen in recent months, after peaking at the start of May at S$2.77 a share. Nevertheless, ComfortDelgro was the top gainer on Singapore’s benchmark index on Wednesday, and posted its biggest intraday percentage gain in almost nine years. 

In an announcement posted on the Singapore Exchange on Tuesday, ComfortDelGro, which has nearly 16,000 taxis under its Comfort and CityCab brands, said the discussions include making its fleet available on Uber’s app. 

The tie-up could include teaming up on fleet management and booking software solutions. It added that “there is no certainty or assurance” that the discussions with Uber would result in an agreement or an alliance materialising.

Nomura analysts Abhishek Nigam and Bineet Banka said in a research note that the possible tie-up “should help improve taxi utilisation” in the short term, and stem the sharp decline in the size of ComfortDelGro’s taxi fleet. “Longer term, though, we see Uber (and Grab) continuing to build on their already strong position (and) we see market position for ComfortDelGro’s taxi booking app as weakening further,” the analysts said.

DBS Vickers analyst Andy Sim said that although no timeline was given, it would be no surprise to see things moving quickly in the coming months, “given the rapid developments in this space and urgency to the market”.

“Overall, despite a lack of details, we think this development is positive for ComfortDelGro and could work in favour of its share price,” Mr Sim said in a research report. “This move could also signal to the market that ComfortDelGro’s management is acting on market changes, and are looking for ways to counter the challenges.” 

DBS Vickers is sticking to its projection that ComfortDelGro’s average taxi fleet will shrink and stabilise at about 15,000 by the 2019 financial year. It has a hold rating on the company’s shares, while Nomura maintained its reduce rating. 

On Tuesday, analysts had called the move “strategic” — given Uber’s need to ramp up its vehicle pool and ComfortDelGro being “unaffiliated” to Uber’s main rival, Grab — but felt both companies made strange bedfellows.

Joining hands with the taxi operator would give Uber a sizeable amount of market, but it would be a “value-losing proposition” for ComfortDelGro if it is simply an avenue to rent out its vehicles, Singapore University of Social Sciences transport economist Walter Theseira had said.