3Q23 results beat expectations, street FY24F adj EBITDA set to rise
- 3Q23 group adj EBITDA at US$29m beat consensus expectations of US$16m, on better-than-expected performance in all the four segments
- Grab raised FY23 revenue guidance by 3% to US$2.32bn while lowered adj EBITDA loss by 32% to (US$22m) approximately.
- Expect consensus to raise FY24F adj EBITDA by 9% to meet our projections on expected improvements in Deliveries & Fintech segments
- Maintain BUY for GRAB with an unchanged TP of US$4.29.
3Q23 group adj EBITDA improved to US$29m from a loss of (US$20m) in 2Q23, beating consensus estimates on sharp improvement in all segments. GRAB’s 3Q23 group adj EBITDA became profitable for the first-time reporting US$29m compared to an adjusted EBITDA loss of (US$20m) in 2Q23, mainly driven by improving profitability across all four segments. Deliveries adj EBITDA as a % of Gross Merchandise Value (GMV) expanded to 3.4% in 3Q23 from 2.7% in 2Q23.
This can be attributed to increasing adoption of affordable services especially through Savers which now accounts for 1/3rd of Monthly Transacting Users (MTU) and drop in incentives as a % of GMV to 9.8% in 3Q23 (11.1% in 2Q23). While Mobility segment adj EBITDA as a % of GMV improved q-o-q to 12.8% in 3Q23 from 12.3% in 2Q23. Mobility adj EBITDA improved by 10% q-o-q to US$180m. For Mobility, incentives as a % of GMV was 7.2% (8.1% in 2Q23). Fintech adj EBITDA was (US$68m), narrowing by US$7m q-o-q, due to lower overhead expenses in the GrabFin more than offsetting Cost of Funds expenses incurred in the payments platform.
GRAB’s 3Q23 GMV of US$5,340m (+1.9% q-o-q) was inline while revenue of US$615m (+8.5% q-o-q) was 4% above consensus estimates. GMV growth was attributed to the growth in Mobility and Deliveries GMV, and Group monthly transacting users (MTUs). Revenue growth was due to better incentive optimization across all segments and a change in business model for certain delivery offerings in one of GRAB’s markets. In 3Q23, Mobility segment recorded GMV of US$1,407m (+6.6% q-o-q) and revenue of US$231m (+11% q-o-q). Fintech services GMV was US$1,275m (-1.9% q-o-q) while revenue improved 25% q-o-q to US$50m.
Incentives as a % of GMV dropped q-o-q across Deliveries, Mobility & Fintech
Source: Company, DBS Bank
GRAB provides an improved guidance on its FY23F group adj EBITDA loss following the breakeven achieved in 3Q23. GRAB has revised its guidance for group adj EBITDA loss for FY23F and following the breakeven achieved in 3Q23 as guided, while increased its revenue guidance. For FY23F, GRAB guides for group adj EBITDA loss of (US$20m) to (US$25m) compared to its previous guidance of (US$30m) to (US$40m) and increased its revenue guidance to US$2.31bn-US$2.33bn (+61% to +63% y-o-y) from previous guidance of US$2.2bn to US$2.3bn.
BUY with an unchanged TP of US$4.29. We use 20x EV to FY24F adj EBITDA of US$572m excluding fintech losses. We value fintech business at US$276m using a conservative 1x gross FY24F revenue. UBER is trading at over 20x 12-month EV/adj EBITDA while offering EBITDA CAGR of 44% over FY23-25F. GRAB offers much higher 70% EBITDA CAGR over FY23F-25F excluding fintech losses.
Overall GMV improved sequentially, with reduction in incentives as key driver of Group adj EBITDA
| 3Q22 | 2Q23 | 3Q23 | ||
| Overall Group | GMV excluding ON-Grab TPV | 5,080 | 5,243 | 5,340 |
| Commission rate implied revenue | 861 | 990 | 999 | |
| Acc Revenue | 382 | 567 | 615 | |
| Segmental EBITDA | 48 | 172 | 221 | |
| Regional corporate costs | (208) | (192) | (192) | |
| Group Adjusted EBITDA | (160) | (20) | 29 | |
| Regional cost as a % of GMV | 4% | 4% | 4% | |
| Total incentives | 476 | 420 | 381 | |
| Total incentives as a % of GMV | 9.4% | 8.0% | 7.1% | |
| EBITDA as a % of GMV | 0.9% | 3.3% | 4.1% | |
| Deliveries | GMV | 2,439 | 2,573 | 2,608 |
| Commission rate implied revenue | 517 | 579 | 561 | |
| Acc Revenue | 171 | 292 | 306 | |
| EBITDA | 9 | 69 | 88 | |
| Take Rate | 21.2% | 22.5% | 21.5% | |
| Incentives | 347 | 287 | 255 | |
| Incentives as a % of GMV | 14.2% | 11.1% | 9.8% | |
| EBITDA as a % of GMV | 0.4% | 2.7% | 3.4% | |
| Mobility | GMV | 1,086 | 1,320 | 1,407 |
| Commission rate implied revenue | 252 | 315 | 333 | |
| Acc Revenue | 176 | 208 | 231 | |
| EBITDA | 135 | 163 | 180 | |
| Take Rate | 23.2% | 23.9% | 23.7% | |
| Incentives | 75 | 107 | 102 | |
| Incentives as a % of GMV | 6.9% | 8.1% | 7.2% | |
| EBITDA as a % of GMV | 12.4% | 12.3% | 12.8% | |
| Financial Service | Off Grab TPV | 1,507 | 1,300 | 1,275 |
| Total TPV | 3,833 | 3,827 | 3,889 | |
| On Grab TPV | 2,326 | 2,527 | 2,614 | |
| Commission rate implied revenue | 44 | 46 | 54 | |
| Acc Revenue | 20 | 40 | 50 | |
| EBITDA | (104) | (75) | (68) | |
| Take Rate | 2.9% | 3.6% | 4.3% | |
| Incentives | 24 | 6 | 4 | |
| Incentives as a % of GMV | 1.6% | 0.5% | 0.3% | |
| EBITDA as a % of GMV | -6.9% | -5.8% | -5.3% | |
| Enterprise | GMV | 48 | 50 | 50 |
| Commission rate implied revenue | 48 | 50 | 50 | |
| Acc Revenue | 15 | 27 | 28 | |
| EBITDA | 8 | 15 | 21 | |
| Incentives | 30 | 20 | 20 | |
| Incentives as a % of GMV | 63% | 40% | 39% | |
| EBITDA as a % of GMV | 17% | 30% | 42% | |
| Source: Company |