4Q23F: Deliveries GMV growth soft
- We expect Grab’s 4Q23F revenue and adj. EBITDA to be in line; but GMV growth could come in softer vs. consensus on weaker Deliveries growth.
- Key growth focus on FY24F include deepening market penetration via 1) affordable offerings, 2) advertising services, and 3) fintech services.
- Grab said it remains committed to sustainable profit growth, riding on the current healthy competitive landscape in ASEAN. Reiterate Add.
4Q23F: Deliveries GMV growth could remain soft
We forecast Grab’s 4Q23F GAAP revenue and adj. EBITDA to come largely in line with Bloomberg consensus at US$635m/US$36m respectively (vs. Bloomberg consensus of US$639m/US$37m), though its GMV at US$5.4bn (+2% qoq, +9% yoy) could come in slightly weaker vs. consensus’ US$5.5bn. We forecast Deliveries segment’s GMV growth remaining soft at +1% qoq in 4Q23 (3Q23: +1% qoq) due to more wet days and flooding during the quarter, though its Mobility segment should record a healthy +5% qoq growth driven by continued demand recovery. We believe Grab’s adj. EBITDA remains on an upward trajectory qoq driven by margin expansion for its on-demand segments, partially offset by higher losses for the fintech segment due to start-up costs for its Malaysian digital bank GXBank.
Committing to “sustainable growth” in FY24F
Going into FY24F, we believe Grab will focus on 1) further improving its unit economics to enable better penetration into the mass market via affordable offerings, 2) growth of high-margin advertising services, driven by wider rollout of its self-serve platform and partnership with restaurants for sale of dine-in vouchers, and 3) expansion of fintech offerings. Continuing on its “sustainable growth” strategy, we forecast FY24F on-demand services’ GMV to grow 13% yoy to US$17.6bn, while group adj. EBITDA expands to US$244m (FY23F: -US$21m). We forecast Grab achieving positive free cashflow by FY24F and GAAP profitability by FY25F.
Reiterate Add with slightly lower TP of US$4.30
Reiterate Add as Grab continues to strive for sustainable and profitable growth beyond breaking even at the adj. EBITDA level, riding on current healthy competitive landscape in ASEAN. Our SOP-based TP is lowered to US$4.30 as switched our valuation methodology for Grab’s on-demand segments to EV/EBITDA (17.2x FY25F, in line with global peers average) as we believe Grab is close to sustainable margin level here; we value its fintech segment using EV/Sales methodology. Re-rating catalysts include
stronger mobility GMV on the back of a recovery in tourism, and acceleration in advertising revenue growth. Downside risks include macro headwinds dampening demand for Grab’s services, leading to weaker GMV, and intensifying competition leading to near-term margin squeeze.