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Current Issues

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Current Issues
Market Demand
Factors that may influence ComfortDelgro demand:

1. Income
2. Expectations
3. Amount of Consumers
Given Singapore’s population density, in 2009 itself, more than 50% of all daily commuter trips in Singapore were made on public transport - about 3.1 million by bus, 1.8 million by MRT and another 0.9 million by taxi. Approximately 15% of the commuters are travelling using the taxi system. This figure has not include the varying tourism figures that will contribute to the usage of the public transport system. Due to the high demands, it is imperative to make public transport system the centrepiece of Singapore's land transport system. From an economic point of view, taxis are still considered luxury items as compared to buses and trains, the number of people resorting to taking taxis as a form of transport will increase gradually because the income parity gap has become narrower as the educational level increases by generation.
However, there has been negative sentiment towards public transport operators after the recent taxi fare hikes and increasingly frequent train service breakdowns in Singapore. These incidents have dampened and shaken the confidence of the public recently.
Increase in Oil Prices
Oil prices are affected by supply and demand and has been increasingly volatile amid with a slower economy growth outlook. Oil is a vital input for the production of a wide range of goods and services, in ComfortDelgro’s case, it is mainly used for transportation purposes and with higher oil prices in the case of diesel which is the main source of petroleum for buses and taxis means higher cost of inputs. Part of the burden will be borne by the commuters inevitably and if that alone does not solve the problem, the total revenue of ComfortDelgro will be affected and will incur lesser earnings.

Increase in Fare Hikes (Taxis)
ComfortDelGro is revising its taxi fare structure to better match supply with the ever-growing demand for taxi services in Singapore. The changes, which include both increases and decreases in fares and surcharges, will come into effect at 6.00am on 12 December 2011. The last fare adjustment was in 2007 and decision has been made due to changing trends in the demand for taxi services.
The new fare structure will therefore include reductions in the peak hour surcharge coupled with an extension in the peak periods to include weekends and Public Holidays. The evening City Area surcharge will also be extended to Sundays and Public Holidays while the current $1.00 Public Holiday surcharge will be removed.
To encourage commuters to call for a cab, call booking charges will also be reduced. Given the combined effect of increases and reductions in fares and surcharges, the new fare of an average 10km trip during the peak period is expected to remain largely unchanged at $12.30. Passengers who travel by taxi during certain periods of the day will actually see a drop in total fares, while others, specifically those who travel by taxi during high demand hours, will see an increase in total fare bill. Mr Yang Ban Seng, CEO of ComfortDelGro’s Taxi Business, said: “With population growth, the opening of the integrated resorts and major shopping malls, as well as a more vibrant night life, taxi demand has increased significantly in recent years. This is especially true for the evenings and weekends. The revised fare structure aims to better meet this increased demand for taxis."
Competitors
The preferred mode of transport has become an integral part of our lives in Singapore today. ComfortDelgro direct competitor has to be Singapore Mass Rapid Transit (SMRT).
1. As of 1 February 2012, SMRT is investing $195 million to replace the signalling system on the North-South East-West (NSEW) Lines. The project, which will be completed in phases from 2016, will make it possible for trains to run at an improved frequency of 100 seconds, down from 120 seconds today, reducing waiting time for commuters.
2. The existing signalling system on the NSEW Lines is a "fixed-block" system that divides the tracks into blocks and can detect where a train is when it moves into a new section. For safety reasons, trains must travel at least one signalling block apart from each other. With this existing system, a time gap of at least 120 seconds is required between a train that is leaving a station and the next one that is entering.
3. The new signalling system used will be a “Communications-Based Train Control” system, where a train's precise location and speed are tracked and safety gaps between trains are not based on signal blocks but between trains. Such a system can reduce the time gap between trains entering and exiting stations by 20 seconds, to 100 seconds, during peak periods.

To further encourage the use of their buses and trains, SMRT has recently launched a mobile app, “SMRT Connect” to keep track of real time train and bus arrival in commuters’ hands. Users of this app can * access information about next and subsequent train and bus arrival times across the SMRT network; * Check first and last train timings; * Receive train service status alerts; * Search for locations on a map; * Locate the train stations and bus stops nearest to their current location; * Find out available SMRT bus services around any location.
These initiatives by SMRT despite the major disruptions on the train services in December is likely to offer stiff competition to ComfortDelgro in terms of ridership.
Government Initiatives
1. Government initiatives to fund bus capex
2. Profitability of bus business had been poor
3. Mildly positive for Land Transport operators
Singapore's government recently announced a commitment to increase bus capacity in Singapore over the next 5 years. The government recognized that planned rail capacity injections from the new rail lines would take time to materialize, but easing of daily congestion is a more immediate task. Consequently, the government would partner the public transport operators (PTOs) to add c.800 buses into the system over the next 5 years. Of these new buses, the government would fund the purchase of 550 buses, while the PTOs would add the balance 250. To fund this purchase and the running costs for 10years, the government will establish a Bus Services Enhancement Fund worth S$1.1bn.
This initiative is to decrease the number of cars on the road and encourage the use of mass rapid transport. The notable aim is to decline the massive use of taxis in Singapore, especially those of central district areas prone to jams and congestion. Furthermore, this initiative should be positive for the bus operators, particularly SBS Transit, as this would significantly reduce their investment costs on buses, and aid in improving margins In a bid to encourage ridership of taxis, ComfortDelGro is launching a four-month campaign to give away $280,000 in taxi vouchers. A partnership with Nets rewards lucky passengers who use the payment system with daily cash prizes and NTUC Linkpoints members can chalk up points if they book Comfort cabs. LTA is also providing $1 million, to be matched by the companies, to hold promotions, discounts and tie-ups with shopping centres and tourist attractions. These measures are part of a push by the Land Transport Authority (LTA) to help prop up the taxi industry. Besides LTA, the other relevant authorities have been supportive in the efforts to grow and ensure the sustainability of the taxi industry. This initiative is to decrease the number of cars on the road and encourage the use of mass rapid transport. The notable aim is to decline the massive use of taxis in Singapore, especially those of central district areas prone to jams and congestion. Furthermore, this initiative should be positive for the bus operators, particularly SBS Transit, as this would significantly reduce their investment costs on buses, and aid in improving margins In a bid to encourage ridership of taxis, ComfortDelGro is launching a four-month campaign to give away $280,000 in taxi vouchers. A partnership with Nets rewards lucky passengers who use the payment system with daily cash prizes and NTUC Linkpoints members can chalk up points if they book Comfort cabs. LTA is also providing $1 million, to be matched by the companies, to hold promotions, discounts and tie-ups with shopping centres and tourist attractions. These measures are part of a push by the Land Transport Authority (LTA) to help prop up the taxi industry. Besides LTA, the other relevant authorities have been supportive in the efforts to grow and ensure the sustainability of the taxi industry.

http://yieldstocks.reitdata.com/category/comfortdelgro/ http://www.mynewsdesk.com/sg/view/pressrelease/comfortdelgro-revises-taxi-fare-structure-712762 http://www.smrt.com.sg/Upload/2012211546372978.pdf http://www.smrt.com.sg/Upload/201212715455090758.pdf http://www.smrt.com.sg/news/News.asp?N_YYear=2012

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