Grab Earnings Preview: Anticipating Solid Results and Growth Opportunities

Southeast Asian unicorn company Grab is scheduled to release its Q1 2024 financial results post-market on May 15. Analysts estimate Grab Holdings to post revenue of USD 638.53 million for 2024Q1, up 21.62% YOY; EPS is estimated to be USD-0.01~0, and loss narrowed 87.65% YoY.

Citi has increased its price target for Grab Holdings to $5.10 from $5 with a Buy rating, anticipating stronger-than-expected results, especially from the mobility sector due to inbound tourism momentum.

Barclays suggests mobility trends might marginally exceed quarter-over-quarter flat expectations with margins remaining stable at around 12.5%. They forecast the potential for higher mobility margins over time as Grab optimizes pricing models and operational efficiency.

JP Morgan maintains that Grab's regional super-app platform is exceptionally well-positioned to capitalize on the increasing online consumer spending in ASEAN. They anticipate that the financial outcomes for the first half of 2024 will likely prompt upward adjustments in short-term earnings forecasts, supported by continued sector expansion, diminishing rivalry, and streamlining within the delivery market. Consequently, JP Morgan assigns an 'Overweight' rating to Grab.

JP Morgan and Barclays both indicate that forthcoming changes in reporting and accounting practices are set to provide investors with a clearer picture of Grab's profitability in its on-demand services. Starting in Q124, Grab will revamp the presentation of its segmental accounts to include regional corporate and advertising revenues, along with relevant payment costs, under the corresponding segments. JP Morgan believes that this change will allow for a more accurate evaluation of the underlying profitability of the on-demand services, projecting an adjusted EBITDA between $385 million and $467 million for 2024E.

Similarly, Barclays emphasizes that stable margins across Grab's delivery and mobility segments, coupled with a potential increase in Gross Merchandise Volume (GMV) and revenues in the first quarter, could drive an uptick in the group's overall EBITDA. They also note that Grab will begin reporting segment EBITDA inclusive of the allocation of corporate regional costs, enhancing the assessment of each segment's profitability. Barclays expects that Grab will provide some historical results restructured under the new reporting format to facilitate comparisons.

Bloomberg Intelligence and JP Morgan have provided positive projections for Grab Holdings, despite expectations of only modest revenue growth for the remainder of 2024. Grab is anticipated to continue its strong financial performance, supported by significant profit margins from its delivery and ride-hailing services, as well as the expansion of its digital banking offerings. The company's market leadership is expected to boost cost efficiency per unit and make its advertising services more appealing to merchants due to its large scale.

JP Morgan suggests that Grab might increase its FY24E guidance following the Q124 results, citing a more rational delivery competition, momentum in the mobility sector, and rising advertising revenue. They predict that Grab's FY24 adjusted EBITDA guidance of US$180-200 million may be on the low side, projecting it could be as high as $209 million. An upward revision of this guidance is expected by the end of 2Q24 at the latest, with an estimated adjusted EBITDA of $42 million for Q124.

Furthermore, the growth of Grab's financial technology segment looks promising, with the Grab-Singtel joint venture, GXBank, contributing for a full year. The introduction of more cost-effective on-demand services could also help Grab expand its market, especially outside of Singapore, by catering to areas beyond city centers.

Singapore's upcoming gig-worker regulations could impact Grab the most, potentially increasing fixed expenses for the company due to the need to provide minimum wages and benefits to drivers and delivery workers.

According to JP Morgan, risks to Grab's rating and price target also include increasing competition in mobility and delivery services, macroeconomic weakness reducing demand, and rising interest rates.