Maybank Investment Bank has trimmed Singapore-based superapp Grab‘s FY25 adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) by 23 percent, which is still remains above the company’s guidance.
The research house said in a note on Tuesday that Grab’s fourth quarter of 2024 results raised concerns on two key fronts: a 29 percent year on year increase in incentives, sparking worries about heightened competition; and higher FY25 operating expenditure (opex) leading to EBITDA outlook fell short of expectations.
“However, we view these spending as tactical rather than indicative of a broader competitive trend,” it said.
It is noted that he mid-point of Grab’s FY25 EBITDA guidance of $455 million is below street expectations of $467 million (as on Feb 18 before 4Q results release).
“We believe two areas may see slower improvement, but this is more related to tactical spending rather than dictated by competitive forces,” Maybank noted.
According to the research house, Grab’s financial services adjusted EBITDA losses are likely to continue as the company’s lending push (especially longer duration loans) would need higher upfront provisioning.
Besides, its regional corporate costs and capex are guided to increase, driven by electric vehicle (EV) fleet expansion and artificial intelligence (AI)-linked investments, which Maybank thinks are likely to drive gross merchandise value (GMV)/margins with a lag.
“That said, Grab has historically taken a conservative approach to its outlook. Our FY25 adjusted EBITDA forecasts are 2 percent to 9 percent ahead of its guidance and as such we see room for potential upward revision in margins,” it said.
According Maybank, Grab’s management noted that the increase in incentives in 4Q24 was in response to new product launches.
Maybank also noticed incentives in the past fluctuated. Indonesia and Vietnam are two markets with elevated competition while the rest of the markets remain relatively rational.
“In Indonesia, ShopeeFood is relatively aggressive but we think Grab also intensified its push in 4Q24, leading to about 10 percent quarter on quarter GMV growth,
“In Vietnam, Xanh SM has aggressively taken market share but at the cost of other operators, while Grab maintained its market leadership position,” it added.
The research house sees Xanh SM relatively stabilizing, as reflected in slowing car sales of Vinfast to Xanh SM.
It is noted that these two markets contribute less than 40 percent of Grab’s GMV.
“All in all, Grab’s growth remains firm and FY25 revenue guidance as such suggests acceleration in GMV growth in FY25,” said Maybank.
It also sees significant synergies in the event of a Grab-Gojek merger and acquisition.
“We estimate potential $106 million/$209 million cost synergies for FY26/FY27 in the event of a merger and should help to lift our Grab fair value by 7 percent to 9 percent,” it added.
In an earlier note, Maybank also highlighted that looking
ahead, it forecasts Grab’s regional corporate costs and capex to rise as the firm invests in long-term strategic initiatives, including AI and EV fleet.
While the firm’s 1Q25 was likely softer due to the combined impact of Lunar New Year and Ramadan, Maybank expects a sharp recovery in 2Q25.
Grab guided for 19 percent to 22 percent year on year revenue growth in FY25, with the mid-point tracking slightly below street estimates, and group adjusted EBITDA of $440 million to $470 million, implying 41 percent to 50 percent improvement year on year.
“Although this guidance falls just under certain analysts’ forecasts, Grab has historically taken a conservative approach to its outlook,” said Maybank.
Grab’s management expects robust on0demand GMV growth to continue in FY25 but foreign exchange fluctuation remains a concern.
Grab’s revenue grows 19 percent on year to $2.8 billion in 2024