Citi Research analyst Alicia Yap, Nelson Cheung and Vicky Wei and CGS International (CGSI) analysts Ong Khang Chuen and Kenneth Tan have maintained their “buy” and “add” calls respectively on Grab Holdings (Grab) ahead of the release of its 1QFY2024 results ended March 31. The company is expected to release its results on May 16.
CGSI’s Ong and Tan have kept their target price of US$4.30 ($5.83) as they expect Grab to report a “solid” gross merchandise value performance.
The analysts anticipate Grab’s 1QFY2024 generally accepted accounting principles (GAAP) revenue to come in at US$665 million and its adjusted earnings before interest, taxes, depreciation, and amortisation (ebitda) at US$38 million.
In spite of “weaker” seasonality and an earlier Ramadan fasting period in 2024, Ong and Tan forecast Grab’s on-demand gross merchandise value (GMV) to remain “flattish” q-o-q but up by 16% y-o-y.
The analysts estimate Grab’s 1QFY2024 mobility GMV to increase by 2% q-o-q, boosted by tourism recovery, while deliveries GMV are expected to dip by 1% q-o-q as investments to reaccelerate growth offset the above-mentioned drags.
“We believe Grab’s adjusted ebitda remains on an upward trajectory q-o-q, driven by lower losses for the fintech segment (growth in credit portfolio), while margins for its on-demand segments remain stable,” say the analysts.
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“Note that Grab will be restating the presentation of its segmental accounts starting 1QFY2024 to enhance comparability of its on-demand segment to peers; we think this could also allow Grab to improve the narrative on its fintech segment with [a] clearer profitability timeline,” they add.
The analysts still see Grab’s FY2024 guidance as “conservative”, especially with the company’s planned investments during the year which includes expanding the user base through tiered offerings and partnerships.
At its results announcement for FY2023, Grab guided for a full-year revenue of US$2.70 billion to US$2.75 billion, compared to CGSI’s estimate of US$2.83 billion. The company has also guided for an adjusted ebitda of US$180 million to US$200 million, which is lower than CGSI’s estimate of US$244 million.
“Note we have not factored any margin expansion for Grab’s on-demand segments (from 4QFY2023 levels) in FY2024, despite Grab’s medium-term expectations of between 100 basis points (bps) - 200 bps upside to its deliveries segment margin. We see room for Grab to revise its full-year guidance higher, considering it has done the same in FY2023,” the analysts write.
“We reiterate our confidence in Grab's execution as it successfully balances ongoing market share expansion with profit growth, capitalising on the favourable competitive landscape in Asean,” they add.
The analysts’ target price represents Grab’s on-demand segments valued at 17.2 times FY2025 EV/ebitda, which is in-line with the company’s global peers’ average.
At Citi Research, Alicia Yap, Nelson Cheung and Vicky Wei have raised their target price estimate from US$5.00 to US$5.10.
The analysts also expect a “solid” set of results supported by potential stronger-than-expected mobility business contributed by inbound tourism momentum with relatively in-line figures from Grab’s delivery, fintech and enterprise segments.
Alicia Yap, Nelson Cheung and Vicky Wei have also upped their estimates for 1QFY2024 total International Financial Reporting Standards (IFRS) revenue by 0.8%. The change comes after the analysts lowered their estimates by 3.3% on deliveries, but upped their estimates by 3.7% and 14.9% for mobility and financial services revenues respectively.
For the full year, Citi Research has adjusted their FY2024 - FY2026 GMV/IFRS revenues by +1.1%/-0.3%, -2.0%/-3.7%, -2.8%/-3.4% to reflect “resilient and stable” on-demand services factor in dynamic subsidies and expansion reinvestment.
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For the 1QFY2024, the analysts anticipate Grab to report total IFRS revenues of US$633 million, increasing by 20.6% y-o-y and dropping 3.0% q-o-q. This includes deliveries revenues amounted to US$308 million, up 12.1% y-o-y, mobility revenues at US$239 million, up 23% y-o-y, and financial services revenues standing at US$56 million, increasing 47.8% y-o-y.
“We model [an] adjusted net loss of US$47 million and adjusted group ebitda of US$31 million compared to Visiblealpha consensus of revenues/net loss/ebitda of US$637.8 million/-US$37.6 million/US$23 million,” the analysts write.
“We expect total IFRS revenues and ebitda to come in-line to slightly ahead of our/consensus expectations,” they add.
Shares in Grab closed at 3 cents lower or down 0.85% at US$3.50 as at May 7.
