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Aug 12, 2015 20:37:40
Indonesian Transportation: In a jam
Threats from private-car taxis and … : On the back of new transportation mobile application services, the Indonesian taxi business is facing a plethora of challenges ahead in the form of fewer drivers available and weaker customer demands (exhibit 5). Based on our study, UBER’s normal tariff, with no traffic jam, is around a third cheaper than taxi fares (exhibit 10). Additionally, these new competitors are here to stay as the transportation ministry has granted temporary operational licenses, while the government is still drafting new regulations for e-commerce business. UBER, operating in 57 countries (exhibit 9), commenced its Indonesian operations in mid-2014 focusing on Jakarta. Now it has around 700 operating units in Jakarta with expansions to Bali and Bandung. UBER collaborates with rental companies in Indonesia and taps into their under-utilized cars for its operations. Normally, UBER collects a 20% service fee on all passenger payments with the rest going to drivers, which may be split with owners of car rental companies in some cases.
… motorcycle-taxi mobile services: On the motorcycle-taxi front, we expect new applications to gain government support, especially in Jakarta, as they may help reduce the number of cars on the streets and ease traffic jams. Go-Jek, an Indonesia-based local mobile application, has experienced phenomenal growth (exhibit 14) due to high consumer demand for its services (exhibit 13), and is now supported by around 14k drivers in Jakarta. In fact, our channel checks reveal that many taxi drivers have migrated to become Go-Jek drivers due to its flexi hours and up to 50% higher incomes for drivers (exhibit 10). A Go-Jek driver can generate a net income of around IDR5-7mn/month, assuming 25 working days and a daily income of around IDR200k-IDR280k. On the contrary, a taxi driver may only earn a monthly income of around IDR2.7mn-IDR3.5mn, based on our market survey. Hence, Go-Jek is extremely popular, forcing the company to limit the number of driver applications to 300 drivers per day due to the high interest from potential joiners. We believe this concept has a great deal of potential going forward, as Jakarta’s Governor, Ahok, is supportive of this service, which he sees as aligned with his vision of making Jakarta a smart-city with less traffic congestion. We think that this application is attractive to low-to-middle-income people as a “business-partnership”, charging only 20% of total revenue as service fees, with simple requirements to join (exhibit 12).
Reiterate sector UNDERWEIGHT, cutting all TPs
The threat from these mobile services is worse for Blue Bird (
) than Express Transindo Utama (
) as BIRD’s revenues are 100% based on its drivers’ incomes, which would decline as UBER and Go-Jek enter the fray. As we also expect fewer drivers to be available, we forecast lower utilization rates ahead, causing earnings downgrades (exhibits 6 and 7). We lower our TPs for BIRD to IDR5,500 (from IDR7,400) and TAXI to IDR520 (from IDR820). Thus, we retain our UNDERWEIGHT sector rating with unchanged REDUCE ratings for BIRD and TAXI, despite their severe market underperformances ytd (exhibit 4). For Adi Sarana Armada (
), we trim our 2016F earnings (exhibit 8) as we expect more difficult operating conditions, resulting also in a lower TP of IDR140 (from IDR150). However, we retain our BUY rating on ASSA due to the cheap PE valuation of 6x for 2016F and 18% upside potential to our new TP.