Analysts at DBS Group Research, Citi Research and CGS International have maintained their “buy” and "add" calls on Grab following the superapp’s 4QFY2023 ended December results release.
For the quarter, Grab reported adjusted ebitda of US$35 million ($47 million), in line with consensus estimates. The adjusted ebitda improved sequentially across all segments except fintech, which declined due to its digital bank launch in Malaysia.
That said, the company’s FY2024 group adjusted ebitda guidance of US$180 million to US$200 million is about 21% below consensus, with 1QFY2024 likely to be a seasonally low quarter, DBS analysts note.
Citi analysts Alicia Yap, Nelson Cheung and Vicky Wei point out that Grab’s share price has reacted negatively, with investors likely disappointed with the softer-than-expected guidance.
The lower guidance is likely attributable to the management’s conservative style early in the year as well as cushion on foreign exchange fluctuations, aside from uncertainty on ramp-up timing and potential traction of new product initiatives.
That said, Citi thinks it is possible for Grab’s revenue growth to be faster in 2HFY2024 compared to 1HFY2024.
To this end, DBS analysts believe it is likely for Grab to update its guidance as the year progresses, similar to last year when it had surprises with an earlier-than-expected adjusted group ebitda breakeven in 3QFY2023.
“With potential reduction in fintech losses to an estimated US$60 million each quarter on average in FY2024, Grab’s quarterly adjusted ebitda run rate would stand at about US$55 million, even if there is no growth in mobility, delivery and advertising,” DBS highlights.
CGS analysts Ong Khang Chuen and Kenneth Tan sees a good start for Grab's FY2024. Despite weaker sesonality, Grab expects its on demand gross merchandise value (GMV) to remain sequentially stable in 1QFY2024. The analysts expect FY2024 adjusted ebitda to be driven by reduced fintech losses, growing advertising revenues and operating leverage from on-demand GMV growth.
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To reflect the latest guidance, Citi has adjusted down its FY2024 and FY2025 GMV estimates by 2% and 3.1% respectively. Its net loss assumption is also lowered to US$92 million and US$8 million respectively, factoring interest expense saving.
Post estimates revision, Citi’s target price is adjusted to US$5 from US$5.20 previously, viewing the latest share price weakness as an enhanced buying opportunity.
DBS and CGS have maintained their target prices at US$.4.08 and US$4.30 respectively.
Shares in Grab closed 29 US cents lower or 8.41% down on Feb 22 at US$3.16.
