Saturday, 2 September 2017

Pathetic Singaporean Taxi Drivers and COMFORT

Returned COMFORT taxis

Prolonged competition from private car operators has made COMFORT, the biggest taxi company in Singapore to report a massive downfall in revenue. Its net profit for the second quarter ended June 30th 2017 fell 6.8% to S$79.4 million, a fall of S$5.4 million in 3 months. Moreover, DBS Equity Research forecasts a 12% fall in taxi revenue in Singapore in 2018, following a similar 12% for the year ending 2017.

She has never had such a hefty revenue decline in her decades of taxi operation and with the competitive "tsunami" not receding in the foreseeable future, investors confidence and funding are now restrained and this would surely lead to a cessation of taxi operations eventually unless a viable restructuring solution is found.

Compounding her revenue misery, COMFORT has a new enemy in Grab, a regional ride-hailing rival that's No 1 choice in Singapore. On Sunday night (Sept 3), Grab "attacked" COMFORT by alluring her taxi drivers with 40 percent rental discount if they switch camp to join rival taxi operators like SMRT, TransCab, Premier and Prime. To a taxi driver, this attractive rental discount would mean a saving of almost $1,500 per month. The discounts are higher if the cabbies take on a private-hire car through GrabRental. This would save them $1,688 monthly or about $60 rental a day. No wonder, COMFORT's share fell for a second straight day after this "attack".

Undoubtedly, COMFORT is now in deep water. She has been complacent for decades with deadwood management and operating with authoritarian auto-mood. Now, having caught napping at the wheel. she belatedly tried to shift gear and started talk with Uber about a partnership. This probably prompted Grab's recent attack. But I doubt anything positive would emerge from discussions between Uber and COMFORT.

Never did COMFORT anticipate that a day like this will come and is now licking her wounds.

Comeuppance time! my friends. Nothing makes me happier than this happening in COMFORT. I'm a strong believer in KARMA!

Remember the day when "monopolistic" COMFORT was a big brother and "governed" the taxi trade with rules that others had to follow. Remember how their disciplinary staff mercilessly sack loyal drivers without hesitation and investigation but merely based on a phone call. These dirt bags and dead woods in COMFORT will soon taste their own medicine.

Today, COMFORT in-house parking lots are insufficient to accommodate the colossal number of taxis returned by their drivers, so much so that she had to rent third party parking lots,

From reported estimates, nett rental income from two running taxis is needed to cover the costs of one superfluous cab in the shelter.  With 5 percent of excessive returned-taxis, COMFORT is suffering a 800 x $100 = $80,000/day ($2.4 millions/month) of loss of income, taxes and depreciation. Therefore, it's not a question of IF but WHEN will COMFORT close shop.

Two years ago, I predicted that COMFORT would face bankruptcy (Link). Today the reality of COMFORT demise is on the horizon like Temasek's sale of N.O.L. (Neptune Orient Lines) to France's CMA  CGM.

It’s disastrous when you have stupid people in charge of companies.

Please allow me to quote the following passages from my most admired blogger "Loh and Behold"

Quote (Link)

Taxi drivers used to be a spoilt lot, cherry picking passengers and disappearing whenever they are needed only to emerge when surcharges kick in.

There are at least 42,800 private-hire cars on Singapore roads today and only 26,000 taxis.

Flexible working hours and the perks of having a car are what attracted many to become private-hire car drivers.

Those still hanging on to the taxis are begging the LTA to let them double up as delivery drivers.

Today Uber and Grab are eating their lunch.

No longer finding it viable to continue as taxi drivers, many are returning their taxis.

You may be the cock of the walk, but a day will come when you’ll end up as a feather duster.


Anonymous said...

Despite being the largest fleet owner of taxis in Singapore and having the mighty millionare MPs and talented grassroots leaders in charge for so many years, they have failed :
1) to better match demand and supply
2) to offer seamless cashless mode of payment like Uber and Grabpay but instead levied high charges on credit card.
3) to incentive cabbies towards higher productivity but instead making excuses about giving so much already when it’s actually ‘peanuts’ that they’re giving.
4) to offer better insurance premiums to cabbies despite having economy of scale.
They’ve now forsaken cabbies, with Temasek having joined Grab as an investor and allowing so-called talented non-citizens to join in the fray while they’re reaping the $$$ from higher petrol taxes, leasing private cars and also selling insurance premiums to the private cars’s drivers, with none of the benefits trickling down to Singaporeans except that the entire road is fast becoming an ‘F1 Circuit’.
Now, they also want to ‘Tikam Tikam’, with Comfort joining Uber, it’s as if they can’t decide which of the two (Grab or Uber) will come out tops, similarly to that of the loss-making Tiger Air of which $$$ subsequently vanished into thin air, with the airline absorbed by Scoot

Anonymous said...

@ Teleban, it is hard to determine if the taxi operation of Comfort Delgro is running at a losses or profits but for purely financial reporting presentation, your position is correct. The reported earning in the 2nd qtr declined to $79.4 million. So in that respect it is still a handsome profit, not a “loss” of James Lim’s incorrect interpretation.

What is important here of ACTUAL PROFIT DETERMINATION is the principal accounting policy that is applied to write-off in asset depreciation in Comfort-Delgro accounting determination. let me illuminate this conceptualisation one step further.

If the accounting policy of fixed asset is 10 years depreciation, straight line – then a depreciation charge per year of a taxi costing $100K inclusive of COE would be $100K divide by 10 = $10K In the hypothetical example of Comfort 1 taxi business earning $100K before interest, depreciation and tax, Comfort will report $90K ($100K – $10K for depreciation) gross profit. Assume a 33.3% tax rate, Comfort will report after tax earnings of $60K. Nice.

But with Uber and other private car hiring, comfort could have stuck with 3,000 vehicles out of use circulation parked in car parks, the unexpired asset values (still to be depreciated), let us say is $100K each, the total idle asset is $300 mln. Those idle taxi may not find driver for the next 2 years and maybe forever until COE expiry, the total write-off must be done at some point in time could be $300 million.

Assuming that Comfort Delgro did an assessment and decided those idle taxis is worthless spending with no future income value and can’t be sold to private owners for reasons of COE restrictions, they may have to do a COMPLETE ASSET WRITE OFF by the end of 2017 Financial year. In a crude sense, it Comfort made $100 mln 1 qtr, 79mln 2nd qtr, $50 mln in the 3rd and 4th qtr, they would end up with a net loss of $21 mln for FY 2017 ($300 mln – $100m – $79 mln – $50 mln – $50 mln)

In this scenario, it is NOT correct to say the Comfort made $79 mln in 2 qtr 2017 but actually operating at a small profit or even a loss. Why? Comfort Delgro has NOT YET did the write off its idle taxi fleet. Had Comfort did the $300 mln write off in the 2nd Qtr instead of waiting to financial year end, it would have reported a HUGE FINANCIAL LOSS instead.

So one has to be very careful at reading and interpreting financial statement and reported earnings.

Anonymous said...

James,Levis have its own customers,giordano customrs will not buy Levis.if everybody wear a pair of Levis,I will not pay for Levis at that price.
Uber and Grab undercut fare of taxis .when you really need them,their prices,do not kpkb when this happens and crawling back to book a taxis.
Ask yourself,is it profitable to drive a PHV?they run on petrol,20% over riding by app providers. No street pick drop of and pick up at taxis park fare.driving 12 to 14 hours daily.
Those young drivers will have no CPF,no saving,no career, how to buy HDB flat?which woman will want to marry them.20 years later,they will be social problems.price to pay to have a car and becoming slaves to car rental companies.
Anyway, a suckered is born everyday.

Anonymous said...

Their CEO, Board of Directors and shareholders have been sucking the blood of the taxi drivers all these years. So now its payback time.

Former TD said...

This is a most satisfying outcome. I hope CDG bites the dust.

They were acting like a lord and treating drivers like their slaves.

They used to terminate drivers over slightest of errors and even though it wasn't the driver fault.

An example: A pax wanted to pay by credit card. The driver tried to charge the card and it failed (probably card is suspended).

Rider complained to CDG and guess what? The driver got terminated.

Just die CDG.

Anonymous said...

You asked the wrong person. You should asked those IB from Singapore Taxi public group fb started by William Lim.