Vocational licence imposition on chauffeured drivers could dampen its growth
The Land Transport Authority has indicated that it could impose stricter penalties as well as vocational licences on the chauffeured vehicle industry in light of its recent growth and development. That could impact all non-taxi services, which includes app chauffeuring such Uber and GrabCar (by GrabTaxi). Some Uber drivers indicated that “time and money required to take a vocational course will be an extra burden” (Non-cabbies offering paid riders may need to be licensed to safeguard commuter interest: LTA, The Straits Times, 10 of June). In the same report, the National Taxi Association indicated that it chauffeured fleets should be regularly maintained and serviced.
Supply of app chauffeurs could be impacted : casual, young and foreign drivers
Our channel checks have indicated that convenience is the key reason for app chauffeuring over driving taxis. This is so as they have the flexibility of driving without shift work and the exclusion of the minimum daily mileage of 250km. Naturally monetary benefits are lesser as app chauffeurs drive lesser distances, subject generally to a lower fare and pay higher booking commission (c.20% of fare per trip compared to c.30-40cents/trip for taxi booking) as compared to taxi drivers. A potential 3 year vocational licence (assuming similar to taxi) would require the application to take a 95 hour course on 5 modules (reduction in convenience), must be Singaporean (we note several foreign drivers on Uber website) and above 30 years old (Uber require drivers above 25 years old). Building market share is essential in penetrating the app chauffeuring business given that app bookings are islandwide. A smaller pool of chauffeurs would not help.
Maintain Buy on CD / SMRT; Bus reforms should remain the focus for investors
Taxi contributes to 32%/12% of revenues and 22%/11% of EBIT for CD/SMRT respectively in the last FY. We maintain Buy on CD with a TP of S$3.48 and SMRT with a TP of S$2.43. (Read Report)
Source : Deutsche Bank Markets Research