Deliveroo's Robust Q4 Implies Continuation of Share Gains in U.K.; Breakeven H2 EBITDA

Deliveroo reported a fourth-quarter fiscal 2022 trading update with gross transaction value up 9% (up 6% at constant currency) and orders down 2% (versus Just Eat Takeaway's GTV down 2% and orders down 12% in the same period). GTV and orders in its core U.K. and Ireland market were robust, up 9% and flat, respectively, implying market share gains (versus Just Eat's GTV down 3% and orders down 10% in the U.K. and Ireland) with monthly active consumers being higher on a sequential basis in the U.K. to 4.1 million from 3.9 million and flat year-on-year mainly due to seasonality. Fourth-quarter GTV growth was primarily a function of item-level price inflation and higher consumer fees (such as delivery fees) with a flat average monthly order frequency (3.4 in the period), despite the challenging consumer backdrop. Although this is a trading update, Deliveroo revealed that second-half adjusted EBITDA is "approximately breakeven" (including recent market exits of Australia and the Netherlands), for a fiscal 2022 adjusted EBITDA margin of negative 1% of GTV better than previous guidance of negative 1.2% to negative 1.5% of GTV. Management will provide guidance for fiscal 2023 on March 16 (annual results). We don't expect to materially change our GBX 215 fair value estimate and no moat rating for Deliveroo. Shares trade deep in 5-star territory.