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Maybank Securities maintains ‘buy’ call on Grab, as slimmer losses enable a focus on growth

Douglas Toh
Douglas Toh • 2 min read
Maybank Securities maintains ‘buy’ call on Grab, as slimmer losses enable a focus on growth
Maybank Securities maintains ‘buy’ call on Grab. Photo: Bloomberg
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Analyst Kelvin Tan of Maybank Securities is keeping “buy” on Grab Holdings at a target price of US$4.00 ahead of its 1HFY2023 ended June results.

Tan expects narrower 1HFY2023 gross merchandise value (GMV) losses of 2% y-o-y as normalisation post-Covid 19 and a healthy showing of off-platform financial services with focuses on buy now, pay later, aids recovery in the mobility business, offsetting weakness in delivery.

“We believe Grab was able to reduce incentives further and increase monetisation as competition eases. Hence, we estimate the adjusted ebitda loss likely further narrowed to US$106 million in 1HFY2023 from US$233 million in 1HFY2022, tapering towards its breakeven target in 4QFY2024,” states Tan.

Meanwhile, in an effort to focus on cost efficiency and help achieve long-term growth, Grab confirmed its decision to reduce its workforce by 11% on June 14. In keeping with this intention, further expenses may be cut as corporate costs largely remain significantly heftier than 2020 levels.

“We see a promising growth outlook for Grab this year due to the potential for a strong 2HFY2023 recovery, irrespective of employee-related costs, although cuts will establish a more competitive cost base long term. We think near-term profit targets can still be achieved even without recent cuts, which focus on geographical cost imbalances and potential automation through generative AI,” says Tan.

With a recovery in tourism following post-Covid 19 re-opening, Tan estimates that Grab’s 1HFY2023 mobility ebitda rose by 9% q-oq to US$166 million.

See also: Analysts raise target prices for Centurion Corp following healthy 1QFY2024 results

Through channel checks, the analyst has observed a lower frequency in surge pricing in Singapore. This is likely due to the continued efforts by the group to increase driver supply. Hence, Tan is forecasting mobility GMV to grow 31% y-o-y in FY2023, while retaining its adjusted ebitda-to-GMV ratio estimate of 12.8%, above its steady-state margin guidance of 12.0%.

Tan also highlights that delivery margins have improved with an easing in competition, citing a weakness in delivery GMV but improving margins following regional cross-checks. “We expect delivery GMV remained lacklustre in 1HFY2023 at US$2.4 billion (-3% y-o-y) given normalisation post-Covid,” says the analyst.

The rationalisation of incentives however, particularly in Indonesia, have certainly helped the adjusted ebitda-to-GMV ratio rise to 2.7% in 1HFY2023, an improvement of 3.8 percentage points (ppt) q-o-q.

To Tan, Grab’s delivery margin guidance continues to reap results as it rapidly approaches its near-term target of 3.0% adjusted ebitda-to-GMV ratio.

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