RHB on Friday (Jan 12) raised its target price on ComfortDelGro : C52 0% to S$1.60 from S$1.50, as it expects recent developments to strengthen the transport operator’s earnings in the year ahead.

In December, the group announced it would fully acquire taxi network operator A2B Australia for A$165.1 million (S$147.3 million). It was also reported that the group would raise its commissions from cabbies to 7 per cent from 5 per cent from Jan 1, 2024.

Following the news, RHB increased its earnings projections for the group by 3 per cent each for FY2024 and FY2025. It believes the acquisition of A2B Australia and higher commission rates could lift FY2024 earnings by 2 to 4 per cent, and FY2025 earnings by 4 to 5 per cent.

The research team also maintained its positive outlook on ComfortDelGro, as it believes growth could be further supported by overseas public transport earnings, and the continued robustness in Singapore rail ridership.

The rise in fares and commission rates, coupled with the introduction of a new fee for bookings on the group’s Zig platform, could also result in strong taxi earnings.

“We estimate that every 1 per cent increase in commissions could increase earnings by 2 to 3 per cent. The increase will be partially offset by the permanent extension of the 10 per cent rental waiver.”

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That being said, despite the rate hike, RHB holds the view that ComfortDelGro’s commissions are lower than that at rivals Grab and Gojek.

“While Tada and Ryde have opted for a commission-free model for drivers, we don’t think this is sustainable, given their smaller operations,” RHB said.

Its new target price of S$1.60 implies a potential upside of 14.3 per cent from the counter’s trading price of S$1.40 as at 11.32 am on Friday. Shares of ComfortDelGro were trading 0.7 per cent or S$0.01 lower at the time.