Yesterday was a great day as my blog has 3 new subscribers – the most I ever had in a single day. Over the last 3 consecutive days, I have 6 new subscribers – thank you very very much!
It inspires me to pen another blog post today.
As you may know from my last blog or previous blogs, ComfortDelgro (CDG) is a major holding in my portfolio, with total holding amounting to 5% of my portfolio value. I have been accumulating CDG since the time when it was $2.50, which was almost 20-25% down from the $3+ days. I was intrigued by the business model of CDG. I must admit I wasn’t very forward looking or visionary then to foresee the rise of the Grab and Uber in Singapore market. I thought with the market power of CDG, it would be able to overcome the challenges of these new service providers. How wrong I was.
As more and more people are aware of how Grab and Uber are encroaching the market share of CDG, the share price of CDG started to free-fall. And most of you are probably aware, it reached the level of $1.90 before it rebounced yesterday after the news of the tie-up with Uber. However, as it was sliding downwards, I held the faith that Grab and Uber marketing promotions would have to come to an end one day and that happens, CDG will bounce back strongly. So, I accumulated CDG as it slided downwards. But was painful really painful to see CDG share price sliding downwards slowly but steadily week after week
At one point, I really felt that I needed to cut loss. I refrained probably because I lacked the courage to realise all that losses but I committed to stop buying more.
However, today, I bought CDG again after a long time. Buying a few lots at $1.93 per share this morning. It is $1.92 per share at the lunch break. It has dropped almost 5% from the yesterday closing price. Like the saying, all income generating investment can be a good investment if it is at the right price. Honestly, I did it out of impulse. I just felt that I should take some actions. One reason is average down my cost. Second reason is that CDG is still expected to pay decent dividend. Even if the distribution is reduced to what it was 5 years ago, it is still a decent 3-4% yield. Thirdly, I think the tie-up with Uber will have some upsides. The market obviously thought so yesterday but somehow changed its mind today. Probably some people are shorting CDG.
Last but not least, another major reason was because of my learning of Grab business model from the my neighbourly taxi driver who sent my family to the airport this morning. I asked him if he would switch to Grab and his answer was a firm no.
He correctly pointed out that some companies/hotels are not accepting Uber/Grab trips for business trip. My company is one of them. He also analysed the business case from his own viewpoints as a driver. CDG taxi drivers have passed stringent checks and tests before they can drive for CDG. This is unlike Grab drivers who doesn’t need to obtain the vocational driving license. In case of any accident, the insurance is based on the commercial insurance taken up by the Grab drivers instead of from CDG in the case of CDG drivers. Hence, CDG does offer a higher level of assurance to passengers.
Furthermore, while the rental for Grab may be cheaper by 25-40% from CDG. Most Grab cars are using petrol while CDG taxis are using diesel. Hence, for the same distance covered, the running cost to the drivers who have to pay for the petrol/diesel is lower due to the lower cost of fuel. The other revelation is that Grab drivers need to fork out 20% of their earnings to Grab while CDG drivers get to keep everything they earn. Therefore, if we do a net-net sum, the earning may be comparable. And as CDG drivers, they do come from a reputable company with strong corporate support. Another useful point that he said that a Grab driver cannot split the rental cost with another driver and in order to cover the cost and make the earning, he will have to work longer hours. Not for our uncles for sure. For CDG drivers, they can do morning or night shift and then share out the cost of rental with another CDG drivers. In terms of work-life balance, CDG drivers are probably better.
After hearing his analysis, I kinda of felt that while Uber/Grab is great for the consumers and good business model for the companies. But for the drivers, I have less positive feeling about it. Ultimately, the drivers are the backbone of taxi companies and if they don’t get good drivers or allow people to feel safe riding in their taxis, they are not going to make eventually. So, with the tie-up of CDG with Uber, I think the gap will be closed. Frankly if you have used CDG apps before, I think it is equally good.
So, the impulse came for me to act and I hope it will turn out well.
Will be great to hear your comments on this, especially if you feel that my analysis is inaccurate.
Meanwhile, take care and look forward to the next blog.