A2B - A2B Australia

[Smurf1976]

UberX legalised in NSW.

Once one state does something then the others usually follow, especially when the state that does it first is a big one (in terms of population).

Certainly government regulators of other industries (eg utilities) do look very heavily at what others are doing when making their decisions (a point that's very obvious if you simply read any report from any regulator of anything, they'll almost always include a table showing what the other states do and comparing with their proposal).

 

[So_Cynical]

A $1 taxi fare levy to fund the 250 million industry compo package, each plate holder to get 20K

http://www.businessinsider.com.au/nsw-is-about-to-say-yes-to-uber-2015-12

One of my workmates drives for Uber and loves it, showed me the partner app and how it works, very impressive and so so easy.

 

[Triathlete]

I tried UBER for the first time last week and must say I was impressed with how easy it was to use.

The person who came had a very nice vehicle that was very well maintained and clean.

Had a lift in 7 minutes from the time I organized it and around $20 cheaper than using a taxi, also not having to exchange money at the end of the trip was great..."Impressed so far".

 

[herzy]

I don't know anybody in my demographic (sub-30) who uses taxis anymore.

I can only see any real endurable market (for the incumbents) in corporate car hire. I've spoken with a lot of drivers and they also seem happy to work for uber.

Contrary to some of the other comments, there's no need to actually poach taxi drivers. Anyone with a licence can do it, and heaps of people do it one day a week. Dangerous times for taxis when both consumers and workers (and now regulators) are happy with uber.

 

[galumay]

Yep, nup, i am not so sure. Cabcharge's own financials show taxis are still very popular and I suspect will always have a significant place in the "cars for hire" market. Uber are a really nasty company with a model that relies on mistreating employees. Companies that treat employees in that way usually end up underperforming.

Longer term there will likely be a mix of players in the "cars for hire" market, taxis will probably continue to be a very significant part of that market, Uber will come under competitive threat from companies that treat their employees better and there will probably be a range of companies fill this space.

 

[So_Cynical]

Yep, nup, i am not so sure. Cabcharge's own financials show taxis are still very popular and I suspect will always have a significant place in the "cars for hire" market. Uber are a really nasty company with a model that relies on mistreating employees. Companies that treat employees in that way usually end up underperforming.

I work in the city (SYD) late nights, the ONLY people i see getting taxis are drunk bogans and middle aged drunks who clearly don't know Uber exists, they stand in the middle of the road waving their arms frantically at full taxis.

Morons.

 

[VSntchr]

Uber are a really nasty company with a model that relies on mistreating employees. Companies that treat employees in that way usually end up underperforming.

What do they do that's so bad? A few drivers I know seem relatively satisfied with the PT job.

I work in the city (SYD) late nights, the ONLY people i see getting taxis are drunk bogans and middle aged drunks who clearly don't know Uber exists, they stand in the middle of the road waving their arms frantically at full taxis.
Morons.

LOL :iagree:

 

[Knobby22]

Longer term there will likely be a mix of players in the "cars for hire" market, taxis will probably continue to be a very significant part of that market, Uber will come under competitive threat from companies that treat their employees better and there will probably be a range of companies fill this space.

Uber are run by bast-rds and are scum of the earth imo. They want to create a poorer class of worker (serf). They are taking a larger and larger percentage of the fare and are ruthless in sacking anyone who complains.

They are now into predatory lending.
http://brontecapital.blogspot.com.au/

 

[herzy]

All this talk of Uber being awful misses the point:
- it's still a far better product for consumers than a taxi, so will affect CAB
- even if Uber fails, alternative will pop up (and are popping up) that are more ethical etc (still bad for CAB)
- I have spoken with a lot of Uber drivers who are more than happy (and none who are unhappy)
- I have spoken with a lot of taxi drivers who are unhappy with Uber (clearly they see competition)
- I have spoken with a lot of taxi drivers who are unhappy with CAB/being a taxi driver

Galumnay I agree with the latter part of your post. Their may well be other players - but that doesn't say anything about the success of CAB.

My question is this: what does a taxi offer that an alternative (Uber or another) can't match or beat? I can't think of a single competitive advantage. Can easily think of many advantages of Uber.

 

[prawn_86]

My question is this: what does a taxi offer that an alternative (Uber or another) can't match or beat? I can't think of a single competitive advantage. Can easily think of many advantages of Uber.

Agreed. While i dont necessarily agree with some of Ubers pricing and tactics, if people are willing to drive for them then so be it.

From a user perspective with Uber/Lyft, unlike cabs, i have:
* Never been refused a ride
* Never felt unsafe
* Never had to explain directions in turn by turn detail
* Always had water and sometimes more provided in car
* Always had hygienic drivers

To be honest for me it is more about the convenience than the cost. I never user Uber Pool/Lyft Line as i feel that that is too cheap for the service you get.

 

[McLovin]

My question is this: what does a taxi offer that an alternative (Uber or another) can't match or beat? I can't think of a single competitive advantage. Can easily think of many advantages of Uber.

Zero. If it's not Uber then it's GoCatch (both have a tonne of cash behind them). Over time others will enter the market. And even when I do use a taxi, it's usually through Uber or GoCatch.

I agree with herzy, I don't know anyone my age (34) who uses anything but Uber.

 

[galumay]

I know its a bit of confirmation bias - but hey its a very respectable source!

This confirms a lot of my thoughts about UBER, http://pages.stern.nyu.edu/~adamodar/

I do think ride sharing apps have their place, but it will always be something thats in addition to Taxis - and probaby will become integrated in the taxi business model anyway. In the long run it will be a positive for the taxi companies, the competition will mean more focus on customer satisfaction and the model of ride sharing apps will be adopted by taxis, (CAB already moving down that path.) Governments will legislate to control and ticket clip the UBERs of the world, and they will stop the employees/drivers from ripped off. The real winners in the long term are the consumers.

 

[McLovin]

I know its a bit of confirmation bias - but hey its a very respectable source!

This confirms a lot of my thoughts about UBER, http://pages.stern.nyu.edu/~adamodar/

I do think ride sharing apps have their place, but it will always be something thats in addition to Taxis - and probaby will become integrated in the taxi business model anyway. In the long run it will be a positive for the taxi companies, the competition will mean more focus on customer satisfaction and the model of ride sharing apps will be adopted by taxis, (CAB already moving down that path.) Governments will legislate to control and ticket clip the UBERs of the world, and they will stop the employees/drivers from ripped off. The real winners in the long term are the consumers.

Interesting article, I assume you mean this one...

http://aswathdamodaran.blogspot.com.au/2016/08/the-ride-sharing-business-is-bar.html

The most interesting bit, imo, is about Google and Apple entering the market. I don't really see anything in that post that could be called a positive for CAB, and if Google or Apple were to enter you'd have to call it a decidedly negative for them. Taxis will always exist (how long will drivers though??), but CAB's strength isn't as a taxi business it's as a payments business. If they lose the big returns they get on that then CAB is a totally different business.

 

[galumay]

Interesting article, I assume you mean this one...

http://aswathdamodaran.blogspot.com.au/2016/08/the-ride-sharing-business-is-bar.html

The most interesting bit, imo, is about Google and Apple entering the market. I don't really see anything in that post that could be called a positive for CAB, and if Google or Apple were to enter you'd have to call it a decidedly negative for them. Taxis will always exist (how long will drivers though??), but CAB's strength isn't as a taxi business it's as a payments business. If they lose the big returns they get on that then CAB is a totally different business.

I think the only real 'market' there is in apps, which is why he mentions Google & Apple. All that a company like UBER offers beyond a booking and payment app is a universal business name, otherwise they are just a ticket clipper trying to dodge regulation and proper treatment of employees. (in fact they try to avoid the obligations involved in an empolyer/employee relationship completely by sham contracting.)

Once taxis implement the same sort of apps for bookings and payments, (like CAB are developing), then I think the d'disruption' will dissapate. We have already seen that capping CAB's margin on payments didnt make as much of an impact on profits as expected, partly because of the increase in volume - at the same time as they were supposedly losing business to UBER, while UBER had all the advantage of no regulation, no compliance, and very low payments to employees.

I guess my view is just that its not as binary as people claim - "Taxis are the scum of the earth, UBER are wonderous disrupters, doing community benefit work, therefore Taxi companies will all go bankrupt and UBER will start making a profit soon"

I dont see the much liklihood of driverless cars in my lifetime, certainly not in any meaningful and widespread sense.

 

[McLovin]

I think the only real 'market' there is in apps, which is why he mentions Google & Apple. All that a company like UBER offers beyond a booking and payment app is a universal business name, otherwise they are just a ticket clipper trying to dodge regulation and proper treatment of employees. (in fact they try to avoid the obligations involved in an empolyer/employee relationship completely by sham contracting.)

CAB's business is largely just ticket clipping as well. The dominance in payments stemmed from CAB's radio network. The radio network still exists, but the advent of the smartphone has short circuited the need for in-car payment terminals to make a non-cash payment.

Once taxis implement the same sort of apps for bookings and payments, (like CAB are developing), then I think the d'disruption' will dissapate. We have already seen that capping CAB's margin on payments didnt make as much of an impact on profits as expected, partly because of the increase in volume - at the same time as they were supposedly losing business to UBER, while UBER had all the advantage of no regulation, no compliance, and very low payments to employees.

At the last half they reported a 28% fall in taxi payment revenue on pcp. Unless I'm missing something, there was no increase in volume, fares processed was basically unchanged. So CAB treaded water even as it dropped the cost of its service by almost a third.

I don't think this is a story that reaches its conclusion in 12 or 24 months, it will take 7-10 years.

 

[Ves]

At the last half they reported a 28% fall in taxi payment revenue on pcp. Unless I'm missing something, there was no increase in volume, fares processed was basically unchanged. So CAB treaded water even as it dropped the cost of its service by almost a third.

Effective rate was 5.5% (according to the graph in the presentation) but WA didn't change the cap until half way through the period.

So for the 2H result (and going forward) it'll be closer to 5% (but slightly higher because SA/NT etc. haven't changed the law yet from memory?). QLD looks like the law has passed now. But won't show in the P&L until it's introduced. Probably 2017FY.

Based on the total taxi fares revenue of $568m (for the half) for every 0.1% the average "ticket clip" drops they lose $0.568m in EBIT. If the effective service fee reduces by 0.5% over the long term (no doubt it will) there is an annualised EBIT impact of $5.68m.

Segment result from Taxi Services restated in such a manner for the 1H16 would be $19.30m vs $22.143m reported.

The Dec 2014 HY was $36.306. That's almost a 50% drop. I wouldn't call that holding up at all. That's a disaster.

And all this is before you even bother considering competition.

There's no reason why this should be trading at such a premium to book value IMO.

edit: I also note they increased Network Operations revenue by a few million. Not sure if those are just fee hikes or they made an acquisition. Without those increases the EBIT looks even worse.

 

[McLovin]

edit: I also note they increased Network Operations revenue by a few million. Not sure if those are just fee hikes or they made an acquisition. Without those increases the EBIT looks even worse.

Combination of both? They added 88 cars to their fleet. I seem to vaguely recall radio network subscription charges were in the order of $550/month. A modest network fee increase plus the addition of 88 new taxis would explain away the extra $1.8m in network revenue. Although network subscription doesn't really divide into number of taxis in the fleet and give a number close to $550, so I might be totally wrong, or different states/cities have different network fees.

And I agree with everything else in your post.

ETA: CAB's announcement re Qld caps is that it will cost them $10.7m in service income. Some of this of course may be recouped in higher usage of the system.

 

[Ves]

Some of this of course may be recouped in higher usage of the system.

I still don't really buy this part of the company's rationale.

This business is all about scale (it's pretty obvious the operational leverage is massive). If lower the processing fees resulted in more usage of taxi services they would have explored this by charging less than the 10% cap years ago and found the "sweet spot."

 

[McLovin]

I still don't really buy this part of the company's rationale.

This business is all about scale (it's pretty obvious the operational leverage is massive). If lower the processing fees resulted in more usage of taxi services they would have explored this by charging less than the 10% cap years ago and found the "sweet spot."

I don't buy that it will offset the decline (halving the fee means you'd have to double the fares processed to stay still), but it is reasonable, imo, to assume that it will have some positive "kick". It has in Victoria and NSW. Although the kick has been much less in NSW than it was in Victoria. It will be interesting to see what happens in Qld.

 

[galumay]

This years AR will give a pretty good insight into the real impact of the changes in the industry, its been long enough in Vic and NSW to see pretty well full flow through, still need to extrapolate numbers for the effect of Qld.

Every time I read through all the negative posts about CAB I get nervous, then I go back and look at my analysis and they still look good value to me! I am going to run the rule over them very carefully this year and make a decision whether to stay invested or find another home for the capital!