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.
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..
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.
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.
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).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.
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.
Wow losing two routes and the market blows up, the hell?
Wow losing two routes and the market blows up, the hell?
Another negative article:
http://www.theage.com.au/business/clock-ticking-down-for-cabcharge-20121113-29adi.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
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.
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