CAB (ASX) cabcharge monopoly

Originally posted by IRaise ↑

Whartanto,
Thanks for one of the most astute and incisive posts I've seen on this site. You've inspired me to set up an account. Long time listenter, first time caller and all that.
CAB is in a lot of trouble. Basically its whole business model has been made obsolete by the smart phone. Credit card payments can easily be made by a smart phone and taxis booked by a smart phone algorithm.
CAB makes roughly half their money from cc payments and half from taxi bookings. They also make a few $$ from a bus group.
The cc payments are facing a lot of new entrants like Ingogo. Ingogo have grown by 1500% in 3 years, charge the same 5% and split their revenue with drivers. So drivers in face of Uber competition are massively incentivised to ditch Cabcharge payments. The recent QLD decision to cap fees means they lose 10M (nearly 20% of EBIT) profit next year. That is before you consider less people in taxis.
Then you look at the taxi booking system and this is where short sellers really get excited. Uber has only just become legal and has basically no market share in business travel. Now that it is legal, business will use this opportunity to save money- in my experience, Ubers are about 60% the cost of taxi after accounting for CABs booking and cc fees. In the US, Uber moved from 15% to 45% of the business market between 2014 and 2015. So this can happen fast.
On the balance sheet they have $100M in debt and despite the recent write down still account for their taxi plates at $41M. Those taxi plates should all be valued at zero given Uber's business model is far and away superior to traditional taxi. I.e. in the old model you have full time taxi drivers who have to overcharge to compensate for being around when no one needs them, they need to run an additional vehicle and pay rent to companies like CAB. The new model matches supply to demand with little overheads. $100M in debt is fine on historical earnings but will come into play as earnings approach zero over the next couple of years.
The bus venture may save them from bankruptcy, but I'm happy being short and expect them to be sub $1 in a couple of years time.

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I read your comments with interest and wonder how a company with debts of $100 million can spend $7 million on new company and to spend a further $10 million to develope IT further? Your comments would be interesting.

cabcharge monopoly, page-42