Citi cuts Grab's TP to US$5, keeps 'buy' as growth profile remains intact

The analysts have lowered their 2QFY2022 GMV assumption for deliveries by 3.6% while increasing mobility GMV by 1.2%.

Citi Research analysts Alicia Yap, Nelson Cheung and Vicky Wei have trimmed their sum-of-the-parts (SOTP) target price on Grab to US$5 ($6.89) from the US$6 previously due to lower revenue assumptions.

However, the analysts maintain their “buy/high risk” rating, believing that Grab’s growth profile remains intact.

Citi’s SOTP values Grab at US$21.36 billion. This is based on 2.5x 2024 adjusted revenues for the delivery business, 11x 2024 adjusted EBITDA for the new mobility business, 12x 2024 adjusted revenues for financial services, 0.5x 2024 revenues for enterprise and new initiatives, and 50% discount on 1QFY2021 year-end cash.

In light of the continued economic reopening, the analysts believe the demand for mobility services will continue to recover and improve. Despite this, they acknowledge that the demand for food delivery and groceries was partially weighted by the reopening activities as customers started to dine out more often.

Hence, the analysts have lowered their 2QFY2022 GMV assumption for deliveries by 3.6% while increasing mobility GMV by 1.2%.

“Thanks to further scale of partner and consumer subsidies, we revised up our IFRS for deliveries by 14.6% and mobility by 2.6% respectively. Similarly, we revised adjusted EBITDA loss lower for deliveries while raised adjusted EBITDA profit for mobility slightly,” they added.

To reflect more conservative GMV assumptions across deliveries and fintech, Citi adjusted its 2022-2024 GMV and IFRS revenue estimates by -5.2%/-0.9%, -8.6%/7.6% and -14.8%/-5% respectively.

Grab is scheduled to report its 2QFY2022 on August 25. Citi analysts now model its total 2QFY2022 IFRS revenues of US$281 million, 56% higher y-o-y and 23% higher q-o-q.

Of this, deliveries revenue amounted to US$108 million, a 139% growth y-o-y; mobility revenues of US$144 million, a 21.7% growth y-o-y; financial services revenues of US$12 million; and new initiatives revenues of US%17 million.

“We model adjusted net loss of US$454 million and total segment EBITDA loss of US$38 million. After adding regional corporate costs of US$220 million, adjusted EBITDA loss will be US$258 million. We expect total result to be relatively in line with our and consensus expectation with deviation on IFRS revenues for each business line and subsidies assumption,” they said.

For 3QFY2022, Citi models total GMV growth of 28.7% y-o-y to US$5.2 billion and total IFRS revenues of 108% y-o-y to US$327 million. The analysts also expect an adjusted net loss of US$388 million and total segment EBITDA loss of US$10 million — or US$243 million after adjusting for regional corporate costs of US$234 million.

Shares in Grab closed 4 US cents higher or 1.37% up on July 28 at US$2.97.

 

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