Citi Research analysts Alicia Yap, Nelson Cheung and Vicky Wei are remaining positive on Grab Holdings with an unchanged “buy” call ahead of its results for the 4QFY2023 ended Dec 31, 2023. The Nasdaq-listed company is slated to report its results for the final quarter around the end of February or early March.
The analysts are also increasing their target price estimate to US$5.20 ($6.98) from US$5.10 previously after they expect to see another solid result in line with Grab’s expectations of sustaining its growth trend on a q-o-q basis in the 4QFY2023.
The analysts also see potential upside to Grab’s IFRS (or international financial reporting standards) revenues and ebitda margins. As such, they have raised their 4QFY2023 revenue estimates by 3.3% to US$642 million, which is 27.8% higher than Grab’s 4QFY2022 revenue and 4.3% higher than its revenue for the 3QFY2023. The increment is attributed to higher revisions on Grab’s deliveries, mobility and new initiatives, which grew by 3.2%, 3.2% and 11.7% to an estimate of US$319 million, US$242 million and US$32 million. Revenue estimates for financial services revenue is estimated to be at US$49 million.
For the quarter, the analysts have modelled an adjusted net loss of US$85 million and adjusted group ebitda of US$35 million compared to investment technology firm VisibleAlpha consensus, which have estimated revenue of US$651.7 million, net loss of US$53.7 million and ebitda of US$37 million.
“We expect total IFRS revenue and ebitda to come in-line to slightly ahead of our expectations,” the analysts write.
“For full year, we adjust FY2023 – FY2025 gross merchandise value (GMV)/IFRS revenue by +0.3%/+0.9%, +2.1%/+9.4%, +3.2%/+12% to reflect revised 4QFY2023, and more upbeat assumption across all segments for FY2024 – FY2025. Our FY2023 – FY2025 net loss is updated to US$555 million/US$148 million/US$46 million or earnings per share (EPS) of –US$0.14/-US$0.04/-US$0.01,” they add.
1QFY2024 and FY2024 estimates
In the 1QFY2024, however, the analysts anticipate a softer-than-normal seasonality due to both the Chinese New Year and Ramadan holidays falling within the quarter. This is also due to a rationalized competitive environment following the exit of the delivery player in Vietnam and Grab’s effective effort in lowering cost to serve, as well as the traction of GrabUnlimited and optimized incentives.
That said, the analysts expect Grab to provide a “relatively upbeat” revenue estimate and ebitda guidance for the full year and reiterate free cash flow (FCF) on its balance sheet by the end of 2024.
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“Post estimates revision, our sum-of-the-parts (SOTP) [target price] is raised to US$5.20 (from US$5.10,” they write.
30-day catalyst
The team has opened an upside 30-day catalyst watch, anticipating Grab’s share price to increase.
At present, Grab’s share price is down some 11% year-to-date (ytd) which is likely due to volatility in the broad market. That said, the company’s fundamentals remain intact.
“Given muted expectations and recent share-price weakness and our expectation of a relatively upbeat 4Q23 result and 2024 guidance, we open a 30-day positive catalyst watch and expect Grab’s share price to trend higher post result,” they write.
Shares in Grab last closed at US$3 on Jan 19.
