Mabybank Investment Bank foresees Grab could counter Uber’s exit with its own buyback as the latter’s minority stake recycle raises concern.
The research house said in a note on Friday that Uber’s management comment on minority stake recycle – besides share buyback commitment – raises questions on what if Uber dilutes its stake in Grab leading to excess selling pressure.
Note that, Grab’s another major holder, Softbank, diluted 8 percentage point stake from the second quarter of 2023 to the second quarter of 2024 and during that period, the stock remained range bound despite broader market and peer stocks recovery.
At that time, Grab did announced a $500 million share buyback program and did purchased $226 million in 2024.
“As with the previous program — and likely at an accelerated pace — Grab could counter a potential stake sale by Uber with its own share buyback program, leveraging its strong balance sheet and positive FCF generation,” said Maybank.
According to the research house, the company’s cash liquidity position remains strong at $7.8 billion and a net cash of $5.7 billion bolstered by recent capital raising of
$1.5 billion and moderate capex requirements which provide ample liquidity flexibility.
“With Grab now generating consistent FCF (cumulative FCF generation of >$2 billion over 2025-2027), it is increasingly well-positioned to initiate shareholder return programs without compromising growth investments,” Maybank said.
It noted a targeted buyback would help neutralize the share price impact of any Uber-induced selling pressure (Uber’s 13.55 percent stake in Grab is worth $2.6 billion), while also signaling confidence in long-term value and strengthening market support during a period of potential volatility.
Uber has announced a $20 billion in share buyback program.
With over $3 billion still to be executed from previous approvals, the total buyback commitment now exceeds $23 billion, equivalent to around 12 percent of Uber’s market cap.
Management plans to fund the program primarily through free cash flow, allocating roughly 50 percent of free cash flow (FCF) per annum to repurchases.
Additionally, as per company Chief Financial Officer, Uber will opportunistically recycle proceeds from the sale of its minority equity stakes to fund both buybacks and selective ecosystem investments, such as autonomous vehicle (AV) partnerships.
Uber holds 13.55 percent stake in Grab besides minority stakes across the globe including in companies like Didi Chuxing (China), Zomato (India) as well as stakes in AV companies.
Meanwhile, Maybank sees Grab’s mild growth headwinds and monetization pausing owing to take-rates are already in line-high versus global peers; rising cost/inflation pressures weighing on consumers’ discretionary spending and driver-partners’ take home earnings are non-competitive.
“We also see risk of a slight flare-up in competitive intensity with a better capitalized Gojek and XanhSM’s entry into multiple markets,” said the research house.
Maybank projects Grab’s adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $485 million in FY25, reaching $1.05 billion in FY27.
It also forecasts its 2024 to 2027 on-demand gross merchandise value (GMV) compound annual growth rate (CAGR) of 17 percent and adjusted net revenue CAGR of 20 percent.
“We expect its take-rates to remain relatively stable,” it said.
Positively, it sees Grab’s structural growth drivers are in place in an underpenetrated ASEAN market as the firm has leadership position in all the markets it operates in and enjoys structural scale advantage.
Grab achieves $20M profit in the second quarter amid higher revenue