Strengthening foundation for future growth
- Grab’s 4Q23 revenue and adj. EBITDA came in line; but GMV growth was softer vs. Bloomberg consensus on weaker Deliveries GMV growth.
- Positives: 1) growth of advertising business, 2) higher Deliveries mid-term margin guidance, 3) launch of US$500m share repurchase programme.
- Negative: FY24F guidance appears conservative, in our view. Reiterate Add on Grab’s strong execution and healthy competitive landscape in ASEAN.
4Q23: Revenue and adj. EBITDA in line; GMV a slight miss
As expected, Grab’s 4Q23 revenue (US$653m, +6% qoq/+30% yoy) and adj. EBITDA (US$35m) came in-line with Bloomberg consensus, while GMV (US$5.44bn, +2% qoq/+9% yoy) was slightly weaker due to softer performance in the Deliveries segment (page 2 for details). Grab reported its first quarter of GAAP profit at US$35m in 4Q23, vs. our/Bloomberg consensus expected loss of US$74m/$64m, but we note this was driven by reversal of accounting accruals. FY23 GAAP net loss came in narrower than expected at 80%/82% of our/Bloomberg consensus forecasts. Given its strong net cash liquidity at US$5.2bn (as at end-FY23F) and having recorded its first positive adj. FCF in 4Q23, Grab announced a US$500m share repurchase programme and plans to repay its outstanding term loan of US$497m (we estimate interest cost savings of US$50m p.a.).
FY24F: Strengthening the foundation for future growth
Grab aims to achieve sustainable and profitable growth in FY24F, while investing in tech initiatives to drive revenue acceleration beyond the year. Priorities include expanding the user base through tiered offerings and partnerships, and enhancing engagement via Grab Unlimited and cross-selling. Grab guides for FY24F revenue of US$2.70bn-$2.75bn (+14-17% yoy) and adj. EBITDA of US$180m-$200m, lower than Bloomberg consensus. We deem this to be conservative and keep our FY24F forecasts (revenue: US$2.83bn, adj. EBITDA: US$244m) unchanged. We see a good start to FY24F – despite weaker
seasonality, Grab expects its on-demand GMV to remain sequentially stable in 1Q24F. We expect FY24F adj. EBITDA to be driven by reduced fintech losses, growing advertising revenues, and operating leverage from on-demand GMV growth. Positively, Grab raised its medium-term adj. EBITDA to GMV margin for the Deliveries segment by 100-200bp (from 3%+ previously).
Reiterate Add
We reiterate our confidence in Grab’s execution as it successfully balances ongoing market share growth with margin expansion, capitalising on the favourable competitive landscape in ASEAN. Our SOP-based TP remains at US$4.30 with Grab’s on-demand segments valued at 17.2x FY25F EV/EBITDA (in line with global peers’ average). Re-rating catalysts include further reacceleration in food deliveries segment GMV growth, and stronger growth trajectory of Grab’s high-margin advertising business. Downside risks include macro headwinds dampening demand for Grab’s services, leading to weaker GMV, and intensifying competition leading to near-term margin squeeze.
