Returning to the new normal
? CD saw continued sequential earnings recovery in 1Q22 with core EBIT of
S$64.6m (+21% qoq, +26% yoy). Results were in line with expectations.
? Outlook positive with most operating geographies easing Covid related
restrictions and returning to a “new normal”.
? CD has also tweaked its taxi revenue model since May 22 to better compete
against PHV peers. Reiterate Add and TP of S$1.80.
Sequential earnings recovery as mobility recovers
CD posted 1Q22 net profit of S$76.7m (+30.4%), helped by S$37.9m gain on asset
disposal. Excluding government grants and exceptional items, CD’s 1Q22 core EBIT
came in at S$64.6m (+20.5% qoq, +25.7% yoy), helped by improving economic activity
levels in Singapore and the UK with easing Covid restrictions. We deem the results as in
line with expectations, with 1Q22 core EBIT coming in at 20%/22% of our/Bloomberg
consensus’ FY22F, as we expect further earnings recovery in coming quarters.
Returning to the new normal
Most of CD’s operating geographies have eased Covid-related restrictions YTD. We
expect economic and social activities to pick up, which should aid CD’s ridership
recovery. In Singapore, after most of the pandemic restrictions were dropped (with all
employees allowed to return to the workplace and group size limits removed), public
transport ridership have recovered to 78% of pre-Covid levels in the last week of Apr 22
(first week of Jan: 67%), according to Land Transport Authority (LTA). In Australia and
the UK, public bus schedules have returned to full service levels, and CD is seeing
improvement in charter business activity levels. China is the only country which remains
affected, though its contribution remains limited (3.5% of revenue in FY21).
Tweaking taxi revenue model to better compete against PHV peers
With the easing of restrictions, CD has seen an increase in daily taxi bookings. Together
with recent fare revision, average daily net earnings of its taxi drivers are currently higher
than the pre-Covid days. To compete better against private hire vehicle (PHV) platforms,
CD announced that it will extend its taxi rental rebate through Sep 22 (to lower fixed cost
for cabbies and narrowing rental gap vs. PHVs). Meanwhile, from May 22 onwards, it has
started charging a 4% commission fee for bookings through its mobile app (c.45% of taxi
rides are currently initiated through its app bookings). CD also plans to onboard more
PHV drivers onto its booking platform to mitigate continued decline in taxi fleet.
Reiterate Add with a TP of S$1.80
We reiterate our Add call as we expect further earnings recovery with easing of Covid
restrictions. We forecast CD to report +43.5% yoy net profit for FY22F, helped by 1)
lower taxi rebates, 2) higher rail ridership, and 3) increased charter activities as tourism
recovers. Our TP is kept at S$1.80, based on 16.8x CY23F P/E (+0.5 s.d. above CD’s 5-
year historical mean). Re-rating catalysts include faster than expected ridership recovery
and tender win announcements. Downside risks include steep decline in taxi fleet size.