Wheels in motion
- 2Q22 PATMI grew 21% yoy, benefiting from the economic reopening in key geographies, but dampened by FX headwinds and China lockdowns.
- Outlook is positive with most operating markets seeing mobility improving post economic reopening.
- CD’s taxi drivers in SG are now enjoying stronger bookings vs. pre-Covid levels, which could pave the way for higher commission fees. Reiterate Add.
2Q22: Operations improved, but hit by FX and China lockdowns
CD posted 2Q22 PATMI of S$42m (+21% yoy), benefiting from economic reopening of its key operating markets. We deem the set of results slightly below our expectations (but inline with street), as 1H22 core PATMI made up 42%/46% of our/Bloomberg consensus FY22F. Excluding government grants and exceptional items, 2Q22 core EBIT came in at S$62m (-4% qoq, +163% yoy). While operations generally saw sequential improvements, CD was impacted by FX headwinds (from SGD strength) and Covid-19 outbreaks in China (higher taxi rebates). CD declared total dividend of 4.26Scts (3% yield), inclusive of 2.85Scts interim dividend (representing 70% DPR from core earnings) and special DPU of 1.41Scts for gain on disposal of its London Alperton property.
Returning to the new normal
The public transport segment saw the strongest improvement, with 1H22 core EBIT (excluding government grants) recovering to S$77m (+124% yoy), led by stronger rail ridership in Singapore and improved charter volumes in UK and Australia. CD notes that the impact of increased energy prices on fuel and electricity was successfully offset by fuel indexation clauses. In Singapore, CD’s rail ridership returned to c.80% of pre-Covid-19 levels in Jul as the workforce progressively returns to the office and nightlife resumes. We expect further recovery to reach 85% of pre-Covid-19 levels by year-end, as we expect hybrid work arrangements to be part of the “new normal”.
Cabbies earnings in SG higher than pre-Covid levels
CD observed that its taxi drivers in SG are currently enjoying higher bookings vs. pre-Covid levels. We think this could pave the way for CD to tweak its taxi business monetisation structure. To better compete with private higher vehicle (PHV) platforms, we believe CD could keep its 15% taxi rental rebate (to lower fixed cost for cabbies) but raise its commission fees (currently at 4%, vs. Gojek’s 10% and Grab’s 20%) in coming months.
Reiterate Add with slightly lower TP of S$1.75
Reiterate Add, as we expect further earnings recovery with CD’s key geographies returning to a “new normal”. Our FY22-24F EPS are fine-tuned by 0.2%-4.9% as we factor in stronger SGD assumptions. With the lower EPS, our TP is slightly lowered to S$1.75, still based on 16.8x CY23F P/E (+0.5 s.d. above CD’s 5-year historical mean). Re-rating catalysts include further adjustment in taxi monetisation and tender win announcements. Downside risks include prolonged strict Covid-restrictions in China.