A2B - A2B Australia

craft · 26 February 2014

So CAB is seen by some as this rent seeking monster that going to have its evil monopoly snatched away from it by........

That view doesn’t accord with the numbers to me.

They currently only make something around 13% ROA which is leveraged up to 17-18% ROE.

Regulators actually need to make the industry more attractive not less if they want private enterprise to step up and improve the current system. Every time they clamp down they limit appetite of potential new investment and competitors.

If booking apps are going to be a serious threat – CAB is in the best position to do an app – it isn’t hard technology. They can just about instantly lock in the volume to stop all other taxi apps dead in their tracks in this country. And their app would work seamlessly with their current taxi logistic and payment systems.

New entrants face a weak competitive position, low industry returns - an established competitor who already has scale in the niche and an early cash flow that would be initially negative then volatile and certainly a long time before it would be stable enough to be leveraged.

CAB might not have the brightest prospects but it has some advantage. When you factor in the price I think it has investment appeal.

McLovin · 26 February 2014

ROE said:
They been around for a while can't do it in Australia due to law and regulation ...they can only play in luxury hire car market ... Different market play differently...

Uber is already doing it Sydney. 40% cheaper taxi fares 10am-5pm everyday.

Psych · 26 February 2014

McLovin said:
Uber is already doing it Sydney. 40% cheaper taxi fares 10am-5pm everyday.

And Macquarie with much more capital employed already tried doing it.

McLovin · 26 February 2014

Psych said:
And Macquarie with much more capital employed already tried doing it.

Uber isn't running taxis, they're just running a loss on the fare. I'm not sure I'd call Uber unfunded, they got $250m in additional equity last year.

Psych · 26 February 2014

You're confusing me McLovin. ROE said they cannot do Uber Taxis based on his reply to qldfrog. You basically said Uber is doing that now. Now you're saying they aren't running Taxis. Confusing.

I also never said they were unfunded just that Macquarie had more funding given their efforts to penetrate the market.

And how long can they continue running at a loss charging that cheap for their luxury cars?

craft · 26 February 2014

McLovin said:
Uber isn't running taxis, they're just running a loss on the fare. I'm not sure I'd call Uber unfunded, they got $250m in additional equity last year.

If I was CAB - I would just be watching them bleed at this stage. If they don't look like they are going to bleed out all by themselves before attaining anything like CAB's scale benefits in this niche (country) - then I would match their app/pricing at the appropriate time and ensure the bleeding continues. Is Uber ready for a fight to the death in AUS without the expense advantage that CAB's niche scale provides? (CAB, as is any incumbent is automatically committed) I see CAB reacting rationally to loss leader competition rather than sitting idly by as it losses its scale advantage.

All worthwhile businesses' will be attacked - its their potential to defend that counts.

I thought the possibilities and probabilities were pretty well priced.

McLovin · 26 February 2014

Psych said:
You're confusing me McLovin. ROE said they cannot do Uber Taxis based on his reply to qldfrog. You basically said Uber is doing that now. Now you're saying they aren't running Taxis. Confusing.

I also never said they were unfunded just that Macquarie had more funding given their efforts to penetrate the market.

And how long can they continue running at a loss charging that cheap for their luxury cars?

Uber is a payment system, it's not running its own taxis anywhere. It is not running taxis in Paris and they don't own any luxury cars either. Uber's payment system is currently offering an up to 40% discount on taxi fares (not on hire cars) booked through it in Sydney. The fares are set by the government so obviously the driver is still being paid the regulation fare. I have no idea how long they can run at a loss, but given the $250m investment was made by Google, I'm sure there's a fair bit of planning that's gone into it.

McLovin · 26 February 2014

craft said:
If I was CAB - I would just be watching them bleed at this stage. If they don't look like they are going to bleed out all by themselves before attaining anything like CAB's scale benefits in this niche (country) - then I would match their app/pricing at the appropriate time and ensure the bleeding continues. Is Uber ready for a fight to the death in AUS without the expense advantage that CAB's niche scale provides? (CAB, as is any incumbent is automatically committed) I see CAB reacting rationally to loss leader competition rather than sitting idly by as it losses its scale advantage.

All worthwhile businesses' will be attacked - its their potential to defend that counts.

I thought the possibilities and probabilities were pretty well priced.

I don't think Uber's intention is to try and takeover from CAB. It is afterall targeting a certain subset of taxi users (upper-middle class/executives). I'm sure the intention with the cheap taxi fares is just to build the customer base that can then be converted to paying for premium cars. That's my theory anyway.

The only point I was making is that there is no law that prevents Uber from undercutting the regulatory fares.

qldfrog · 26 February 2014

ROE:
"I can say with 99% certainty this won't destroy cabcharge business it just ride along the side with cab like everyone else.. "
I obviously do not share this view and the over regulation in australia will have to be crushed or the country will be.
In either case better to put your money elsewhere than in CAB.
We just need the recession we need to have to see these type of taxi monopoly diseappear, legally or not
" I am not an illegal taxi, I am an unemplyed mining engineer (or V* designer) sharing petrol cost with a mate I found via a trip share app"
anyway, all good...

ROE · 26 February 2014

I always walk the talk adding more to my holding not long ago when Mr Market price it too cheap.

I dont think CAB is risk free, there are always potential new player and disruption to the business but the price it offered is more than compensate for the risk according to my calculation.

The trick in the market is to recognise opportunity and avoid high risk
sometimes over whelming fear got confused with high risk and therefore present opportunities

under $4.0 close to 8% fully franked yield double what bank rates pay with tax benefits.

qldfrog · 27 February 2014

might be right indeed: as long as you keep your eyes open and are ready to sell when need be and do not expect to have these shares in 10 years...
anyway, DYOR I am far from being a role model trader/investor

Klogg · 30 March 2014

Just started looking into CAB a little further and the case looks compelling. From the outside, it looks doomed to lose profits, but looking further into it I'm not really seeing that... (I'll save everyone my opinion - everything I'm seeing has been mentioned in one form or another)

However, my one big concern is the stock ownership of management. I get the feeling Reg Kermode is ready to hand over to someone else, but if I'm wrong, then why did he sell all of his holding in the company? And further on this point, only 3 of the 6 directors have any holding in the company... (as of last annual report)

Anyone with thoughts or info on this would be great...
(I'm still looking through reports - will post if I find the answer to my own question)

Thanks

McLovin · 8 April 2014

NSW looking to introduce 5% capped fee and give formal approval to apps.

The NSW Government will explicitly allow consumers to use mobile apps like Uber and goCatch to book taxis for the first time under reforms to the state’s taxi laws.

The state government will also cap the surcharge on credit and debit card payments for taxis at 5 per cent, following similar moves by the Victorian Government last year, effectively halving the fee charged by incumbent Cabcharge.

http://www.afr.com/p/technology/nsw_government_reforms_taxi_laws_g87fvrIFEV6SnBL2LEgHvN

Huskar · 8 April 2014

Thought it would fall lower on the announcement actually - must have been priced in a fair amount already.

On Uber etc replacements, another interesting drawback I discovered (surely would be fairly easy to fix?) is you cannot actually book ahead with Uber. You can only use when you definitely want a ride. I had a friend in procurement at a large company who could not draft Uber onto books because of this inability to book ahead.

But I think Uber will be here to stay - CAB really needs to make haste on kinking out its booking system as it is notorious how often the booked taxi (by phone / internet / whatever) fails to turn up.

It is priced at present for half the earnings it currently has, which may be fair - then again, if half earnings don't materialise then it is undervalued. And sit with fairly consistent dividend stream all that time. Sounds like a situation where limited downside and fair amount of upside.

skc · 8 April 2014

Huskar said:
Thought it would fall lower on the announcement actually - must have been priced in a fair amount already.

On Uber etc replacements, another interesting drawback I discovered (surely would be fairly easy to fix?) is you cannot actually book ahead with Uber. You can only use when you definitely want a ride. I had a friend in procurement at a large company who could not draft Uber onto books because of this inability to book ahead.

But I think Uber will be here to stay - CAB really needs to make haste on kinking out its booking system as it is notorious how often the booked taxi (by phone / internet / whatever) fails to turn up.

It is priced at present for half the earnings it currently has, which may be fair - then again, if half earnings don't materialise then it is undervalued. And sit with fairly consistent dividend stream all that time. Sounds like a situation where limited downside and fair amount of upside.

When VIC made the changes everyone pretty much predicted that other states will follow suit. So hence the fall today is only 5-6%, rather than 15-25%.

Smurf1976 · 8 April 2014

Huskar said:
On Uber etc replacements, another interesting drawback I discovered (surely would be fairly easy to fix?) is you cannot actually book ahead with Uber. You can only use when you definitely want a ride. I had a friend in procurement at a large company who could not draft Uber onto books because of this inability to book ahead.

Another factor with many companies would be reliability. Eg there are plenty who have a "use the cheapest" policy when it comes to air travel, with an exclusion on one particular airline due to a poor track record for reliability. So it's really "use the cheapest from the approved list". Uber would fall into the same category if there are problems with taxis not turning up - an individual might be OK with that but the cost of a delay to business travellers would in most cases far exceed any cost saving on the taxi fare.

McLovin · 29 April 2014

Kermode resigns. Apparently he has aggressive form of cancer. Doesn't sound good at all.

ROE · 29 April 2014

McLovin said:
Kermode resigns. Apparently he has aggressive form of cancer. Doesn't sound good at all.

he in his 80s isn't it? time to let it go

I think it is a good thing we need new blood on CAB board with fresh eyes.

ROE · 29 April 2014

Smurf1976 said:
Another factor with many companies would be reliability. Eg there are plenty who have a "use the cheapest" policy when it comes to air travel, with an exclusion on one particular airline due to a poor track record for reliability. So it's really "use the cheapest from the approved list". Uber would fall into the same category if there are problems with taxis not turning up - an individual might be OK with that but the cost of a delay to business travellers would in most cases far exceed any cost saving on the taxi fare.

Not sure if driver look at their liability when they drive people around with Uber ..from what I understand all the liability is with you...this could bankrupt the driver if they are not properly insure

McLovin · 29 April 2014

ROE said:
he in his 80s isn't it? time to let it go

I think it is a good thing we need new blood on CAB board with fresh eyes.

Yeah I agree he was probably due to step aside. But from a health perspective it sounds as though whatever he has is terminal.

A2B - A2B Australia

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Psych

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Psych

craft

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qldfrog

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McLovin

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skc

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McLovin

ROE

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