Here's why ditching Lion City Rentals is a boon for ComfortDelGro

It frees up $295m that can be used for other productive acquisitions.

ComfortDelGro's termination of its acquisition of a 51% stake in Uber’s car rental arm in Singapore, Lion City Rental (LCR) is more of a boon rather than a bane for the company, OCBC Investment Research said.

OCBC Investment Research analyst Eugene Chua said the termination will free up $295m that would have been spent on assets that may become unproductive without the partnership with Uber.

"We believe walking away from this acquisition allows ComfortDelGro to make other accretive acquisitions to grow its businesses, potentially outside of the disrupted taxi segment," Chua said.

ComfortDelGro, however, still intends to enter the private hire car (PHC) space. It said that the most likely way to enter the PHC space would be through partnerships with PHC operators rather than creating a new platform.

More recently, after the Grab-Uber merger, new entrants have also entered the PHC space in Singapore, with more said to launch services in the second half of 2018.

One of the said entrants, Go-Jek, is reportedly in discussions with ComfortDelGro in a potential partnership in Singapore but it remains a speculation at this stage, Chua noted.

"All considered, we deem a tie-up with Go-Jek a positive one as it may potentially lead to more booking jobs for ComfortDelGro taxi hirers through Go-Jek’s PHC platform, translating to lower fleet idle rate as drivers are less incentivised to return their taxis with more sustained earnings," he said.

Chua said they prefer to wait for better clarity over ComfortDelGro’s strategy competing in the PHC space as well as Grab’s response to new competitors.

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