CAB - Cabcharge Australia

[TikoMike]

So the downfall of Cabcharge will be phone apps? I would hardly think so. If it was Macquarie vs Cabcharge or Phone Apps vs Cabcharge I would bet money on Macquarie doing the more damage. Oh wait this already happened.

Try again SMH.

[banco]

I think CAB is a risky investment.
We are last to hear what decisions are made and the company can be severely affected by government intervention and is subject to new disruptive technologies.

I think you've got that the wrong way around. They are very heavily dependent on government intervention and put a lot of effort into lobbying (or to put it more plainly rent seeking).

[ROE]

A country with rule of law required regulations, whether it's taxi or telco or bus or utilities or driving a car or buying a house.

you cant just give up regulation because some small time guy said I can do whatever I don't need regulation

they can applied for taxi license, radio network similar to CAB, nothing stopping them from doing it
they just want to pay nothing and get all the access ??

its like Telstra license some spectrum and some guy comes a long and said I can run my own spectrum we dont need
telstra license spectrum..

[ROE]

Let me dissect the fear mongering in the article

"Cabcharge's stock price would be 10 per cent of what it is now and that's why they're lobbying so hard because they've got an incredible amount to lose from us being successful."

30% of CAB earning is from Bus go nothing to do with taxi :-)
CAB hold various properties and taxi license worth in millions...they also operate their own cabs

the best these guys can do is eat a few percent into CAB business ...
10% of share price make it what 60c ? bus division is 17c EPS
that makes it 3.5 times earning if you completely wipe out CAB taxi earning

"The two companies said they had signed up 1000 and 10,000 drivers respectively and job volumes were increasing exponentially."

at this rate they will capture all of the CAB market shares in less than a few years
including hundred of taxi owned by CAB?

Try again SMH

[banco]

A country with rule of law required regulations, whether it's taxi or telco or bus or utilities or driving a car or buying a house.

you cant just give up regulation because some small time guy said I can do whatever I don't need regulation

they can applied for taxi license, radio network similar to CAB, nothing stopping them from doing it
they just want to pay nothing and get all the access ??

its like Telstra license some spectrum and some guy comes a long and said I can run my own spectrum we dont need
telstra license spectrum..

Does the phrase regulatory capture mean anything to you? Cabcharge are the poster child for regulatory capture.

[McLovin]

Let me dissect the fear mongering in the article

"Cabcharge's stock price would be 10 per cent of what it is now and that's why they're lobbying so hard because they've got an incredible amount to lose from us being successful."

30% of CAB earning is from Bus go nothing to do with taxi :-)
CAB hold various properties and taxi license worth in millions...they also operate their own cabs

the best these guys can do is eat a few percent into CAB business ...
10% of share price make it what 60c ? bus division is 17c EPS
that makes it 3.5 times earning if you completely wipe out CAB taxi earning

"The two companies said they had signed up 1000 and 10,000 drivers respectively and job volumes were increasing exponentially."

at this rate they will capture all of the CAB market shares in less than a few years
including hundred of taxi owned by CAB?

Try again SMH

CAB's taxis business is the bees knees, EBIT of $70m on $300m in assets. The bus business is asset heavy and low margin by comparison.

If something happens to their cosy taxi business then I can't see them trading at the same multiples for that asset heavy business.

[TikoMike]

CAB's taxis business is the bees knees, EBIT of $70m on $300m in assets. The bus business is asset heavy and low margin by comparison.

If something happens to their cosy taxi business then I can't see them trading at the same multiples for that asset heavy business.

Lower margin but higher volume and more reliant (reliant from an investor's POV) as people take their dependant routes each and everyday. The growing population doesn't hurt.

[McLovin]

Lower margin but higher volume and more reliant (reliant from an investor's POV) as people take their dependant routes each and everyday. The growing population doesn't hurt.

All I'm saying is that the bus business requires a lot more heavy asset investment: $1b in assets generating $40m in NPAT. All other things being equal they will need $1b more invested in the business to generate an additional $40m in profit. Compare that to the taxi business. Buses maybe reliable and have a granular customer base but they are not anything like the money spinner that is the taxi business.

[Vesupria]

All I'm saying is that the bus business requires a lot more heavy asset investment: $1b in assets generating $40m in NPAT. All other things being equal they will need $1b more invested in the business to generate an additional $40m in profit. Compare that to the taxi business. Buses maybe reliable and have a granular customer base but they are not anything like the money spinner that is the taxi business.

Comfort Delgro (the JV partner) seems to earn a return close to it's long term cost of capital - which confirms what you are saying. Cabcharge is a pretty mature business that spits off lots of free-cash flow, so to add to their existing revenue streams with any predicatably, it makes sense to expand the bus side of the business, even though, the long-term returns won't be as fantastic as the core taxi business. If they can acquire other bus companies at a discount the results won't be too bad, the real danger is over-paying (whilst using debt).

The current share price is still under my calculation of intrinsic value, and that is assuming that the new incremental capital invested going forward earns around 12%. The margin of safety isn't as large as it has been of course.

I think it's still a fairly good (but boring) investment.

EV / EBIT is still under 8x at Friday's close. That's not ultra demanding for a stable business with some growth prospects.

[ROE]

All I'm saying is that the bus business requires a lot more heavy asset investment: $1b in assets generating $40m in NPAT. All other things being equal they will need $1b more invested in the business to generate an additional $40m in profit. Compare that to the taxi business. Buses maybe reliable and have a granular customer base but they are not anything like the money spinner that is the taxi business.

most of cab capital currently used are for building the fleet so you see low return, once that capex is done and out of the way of you will see very good return as all it left in maintaining the fleet

The way cab structure government contracts not about people but how many km they driven each year...
by the time people see this stock it price would have gone the distance so see it before everyone else

people will scratch their head and said I thought buses is low margin high capex, why Cab did the opposite -

[TikoMike]

Wow losing two routes and the market blows up, the hell?

[prawn_86]

Wow losing two routes and the market blows up, the hell?

Wow, only just saw the price since you posted.

I dont like to catch falling knives, but any price under $5 historically has provided a great yield and capital gains for when it bounces up above $5

[skc]

Wow losing two routes and the market blows up, the hell?

There's another bus route up for re-tender plus the Vic taxi inquiry due out anytime soon so looks like a bit of nervousness.

Feels like an over-reaction but I have no idea how much revenue and profit those 2 routes mean for CAB.

[TikoMike]

Besides the market overreaction on the losing the 2 routes (even though Comfortdelgro Cabcharge is still servicing for another year) people are most likely reacting to SMH's report on phone apps.

Ok so this is just my opinion on why phone apps with PayPal will not affect CAB all that much.

1. Like cash, PayPal on a phone app will be just another alternative way for people to pay for their taxi ride. Cabcharge has been battling cash for the last 30 odd years. In my not so humble opinion PayPal access will not make much of a dent.

2. Corporates and government usually don't supply credit cards or other forms of payment to most of their employees/surogates for taxi rides. Why the hell would you think they would supply a PayPal account for them to use?

3. Look at who the users of the phone app will be. People on the street will still use the old fashioned way to grab a cab (ie cabs going by with their roof light turned on)

4. The phone apps have been getting quite a few bad reviews with the driver not even turning up. Don't think I would want to pay from my PayPal account if the driver doesn't even turn up!

5. As ROE said earlier, SMH tends to scaremonger and give bad press when it comes to CAB or Reg Kermode. ie exaggeration of the actual facts and effects.

Like I said just my opinion, feel free to express your own logic.

[McLovin]

It looks a bit overdone considering it was the loss of two relatively small bus contracts. Then again, the previous NSW state government used to negotiate these contracts whereas the new government has introduced tendering. The Hills Bus routes are big for CAB's JV and they will go to tender early next year.

[prawn_86]

Another negative article:
http://www.theage.com.au/business/cl...113-29adi.html

I still think that under $5 is good value due to attractive yields, but there does seem to be more regulatory risk coming into play these days. Although interesting to note that this is the 7th enquiry into the taxi industry in the last 30 years, so lots of inquiries but not much action

[TikoMike]

Another negative article:
http://www.theage.com.au/business/cl...113-29adi.html

I still think that under $5 is good value due to attractive yields, but there does seem to be more regulatory risk coming into play these days. Although interesting to note that this is the 7th enquiry into the taxi industry in the last 30 years, so lots of inquiries but not much action

Regulatory risk these days? The only thing I see is if every bit of this inquiry goes through, that's the only regulatory risk I see. But hopefully they will see that most of the recommendations are ridiculous and created by some idiot academic

[Vesupria]

This is straight from Phil Fisher book (common stock, uncommon profit) I read some years ago...I still regards it as one of all time best book on stock investment...

Don't quibble over eighths and quarters.
After extensive research, you've found a company that you think will prosper in the decades ahead, and the stock is currently selling at a reasonable price. Should you delay or forgo your investment to wait for a price a few pennies below the current price?

Fisher told the story of a skilled investor who wanted to purchase shares in a particular company whose stock closed that day at $35.50 per share. However, the investor refused to pay more than $35. The stock never again sold at $35 and over the next 25 years, increased in value to more than $500 per share. The investor missed out on a tremendous gain in a vain attempt to save 50 cents per share.

Learned my lesson and fortunately eight months later I have another chance at these prices. Bought at market just before. No bickering over a few cents this time. Hopefully the negative sentiment remains for quite some time, I am more than happy to keep buying.

[TikoMike]

Learned my lesson and fortunately eight months later I have another chance at these prices. Bought at market just before. No bickering over a few cents this time. Hopefully the negative sentiment remains for quite some time, I am more than happy to keep buying.

I bought some last week on Thursday, wish I waited to today to get an even bigger discount. All good though. Aberdeen and Lazard agree with you too with their mop up of 1mill+ shares each.

[TikoMike]

Been quite a few articles on here posting negativity about CAB so I thought I would post one of Professor Idiot Academic just for a bit of a laugh, enjoy:

http://www.ozcabbie.com/allan-fels-t...inst-oz-cabbie