While the equity split was not revealed by CDG or RATP Dev, Jaiswal, referring to filings from the Danish corporate registry, notes that RATP Dev may hold about 66.66% to 89.99% of the JV while CDG holds a 25% to 33.33% stake.
Given that the current metro operator is expecting its FY2025 PAT to be around 40 million to 50 million Danish krone ($8 million to $10 million), CDG’s stake of about 30% is expected to reap an “immaterial” contribution to earnings in the near-term. In FY2024, the operator’s PAT stood below expectations at 46 million Danish krone, lower than its guidance of 60 million to 65 million Danish krone, The lower-than-expected earnings were due to deferred maintenance, higher certification expenses and added cybersecurity costs.
That said, Jaiswal believes a successful bid would reinforce CDG’s global rail credentials. “This would build on its recent Paris Line 15 contract win (southern sector, six years, in consortium with RATP Dev and Alstom),” he says. “Success in Copenhagen would enhance CDG’s credibility in future global offshore & marine (O&M) tenders and diversify its earnings optionality beyond Singapore, the UK and Australia.”
Jaiswal has an unchanged “buy” call and target price of $1.75.
Maybank Securities analyst Eric Ong has also kept his “buy” call and target price of $1.70 after several pluses for CDG.
On the bid for Copenhagen Metro, Ong estimates CDG’s share of the EUR2.4 billion ($3.62 billion) contract to be at about $750 million or $62.5 million on a yearly basis for the 12 years. “Based on historical track record, the group said its success rate is above 50% for new tenders and [over] 90% for tender renewals.”
In addition, Ong believes the acquisition of the rest of CityCab on Sept 1 will be accretive to CDG’s earnings per share (EPS) upon the completion of the transaction, with the deal valued at 3.9 times adjusted EV/ebitda and 13 times P/E. “The group will see about four months of earnings contribution in FY2025 (or [around] $2 million/ +1% of our FY2025) from its additional stake in CityCab.”
See also: RHB raises DBS target price to $57.10 after bank’s stock hits new high
Ong also notes that having full ownership will strengthen CDG’s core point-to-point (P2P) business in Singapore and will allow the group to better integrate and shape its global P2P business. “CDG will also invest more in its Zig platform and introduce differentiated service offerings to meet market demands amid keen competition from other ride hailing companies.”
On CDG’s latest initiative to start hotline bookings and doorstep requests for taxi rides between Singapore and Johor Bahru, Ong does not expect any material financial impact due to the “very small volumes”; only 90 taxis are licensed to do cross-border services out of CDG’s fleet size of 8,000 cabs.
Shares in CDG closed 1 cent lower or 0.67% down at $1.49 on Sept 19.
