Technology destroyed some traditional businesses (2): Comfort Delgro

Until a few years ago, Comfort Delgro has been in a very comfortable position. The business model that has been used in Singapore was able to be duplicated and adapted locally in other important cities in Australia, the United Kingdom (UK), China, Vietnam and Malaysia. The whole business centred round the traditional land transport operations and provided the company with various sources of income. The share price doubled year from mid-2012 of around $1.50 to more than $3 per share in mid-2015. Some might say that that was not exactly a star performer, but I would say that the stock performance was great in view of its ‘old-economy’, almost recession proof, traditional land transport business. It is not easy to find a traditional business whose share price that could double in a matter of three years. With the euro crisis brewing at that time, most blue chips stocks were not really performing following the run up after the global financial crisis. So given the backdrop of the unexciting STI at that time, Comfort Delgro stood up among blue-chips stocks. It was the top performing stock in year 2015.

Now the situation has turned. Rental cars Uber and Grab have been making headlines of late. They took many traditional taxi businesses in many cities by storm with their aggressive pricing policies even though the companies are still incurring losses. They seemed determined to break out the traditional taxi business at all cost. The situation in Singapore is no exception. Comfort Delgro, being the biggest taxi operator in Singapore is obviously the victim of this onslaught. By today, Comfort Delgro share price has just sunk passed the $2.37 level, which has been a very strong support threshold for several months. The situation is not all pleasant for the Comfort Delgro at the moment.

Brennen has been investing in the stock market for 27 years. He trains occasionally and is a managing partner for BP Wealth Learning Centre. He is also the author of the book – “Building Wealth Together Through Stocks” which is available in both soft and hardcopy.