Land Transport

Land Transport: LTA looking to raise entry barrier for taxi industry
In light of the recent spurt of app-based private chauffeur services such as Uber and GrabCar, LTA has indicated that it is looking to impose stricter regulations like the requirement of vocational licences for the non-taxi drivers.

The move is seen to raise the barrier to entry for competition in the regulated taxi market, run primarily by ComfortDelgro (holds 59% total fleet), privately-owned Trans-Cab (17%), SMRT (13%), Premier Corporation (8%) and Prime Leasing (3%).

This should ease some investor worries for both ComfortDelgro and SMRT, particularly on whether its taxi lease rates and operating margins could come under pressure from the unexpected increase in competition.

In the most recent financial year, taxi operations account for 32%/12% of revenues and 22%/11% of operating profit for ComfortDelgro/SMRT respectively.

For ComfortDelgro, the stock is trading close to consensus' 12-month average TP of $3.15, while for SMRT, street's TP of $1.79 suggests an estimated 16% return from the current price.