MAYBANK Securities downgraded its call on Grab to “hold” from “buy” and reduced its target price by 11.1 cent to US$4 from US$4.50.
This came as the research house sees mild growth headwinds and monetisation hurdles for the Nasdaq-listed transportation and fintech platform, despite its scale advantages and structural growth drivers, it said in a report on Tuesday (Jun 18).
Its lowered target price implies an enterprise value that is 22.5 times earnings before interest, taxes, depreciation and amortisation for FY2025, which is a premium to the global average of one time.
It also implies an upside of 11 per cent to the counter’s last closing price of US$3.59 on Monday. Shares of Grab were down 0.3 per cent or US$0.01 at the time.
Maybank’s concerns emerged as Grab’s online food delivery take-rates, which stand at 22 per cent, come in line or exceed its global peers in more “evolved” markets such as the US and China. Ride-hailing services, meanwhile, are in line with peers.
“This suggests a potential capping of the rates,” said analyst Hussaini Saifee.
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Take-rates refer to the revenue generated by a company from each transaction.
Grab could face pricing or commission pressure from both its consumers and driver-merchant partners, as rising cost and inflation concerns weigh on discretionary spending and the take-home earnings of its driver partners.
A Maybank survey found that 65 per cent of consumers plan to lower usage in response to price increases. Its channel checks, meanwhile, suggest relative driver earnings pressure, which exerts supply-side pressure.
The research team expects Grab’s gross merchandise volume to grow at a compound annual growth rate of 12 per cent to US$22 billion over FY2023 to FY2026. It also forecast revenue to grow to US$2.7 billion in FY2024, compared to its revenue of US$2.3 billion in FY2023.
Furthermore, the analyst noted the risk of a slight flare-up of competition in Indonesia and Vietnam, with Gojek being better-capitalised and Xanh SM entering multiple markets.
Maybank’s survey results reflected a 20 to 30 per cent higher consumer preference for Gojek over Grab in Indonesia. In Vietnam, entrant Xanh SM was ahead in preference relative to its market share over Grab.
It also sees Grab’s 2024 revenue growth guidance of 14 to 17 per cent as conservative, with room for upward revision.
“Underpenetrated Asean markets coupled with Grab’s material competitive moats leave room for sustained high growth despite competitive skirmishes,” Saifee noted.
