Analysts back Grab’s Atome buy, even if earnings boost takes time to arrive

[SINGAPORE] Analysts are broadly backing Grab’s phased US$1.5 billion acquisition of regional buy-now-pay-later (BNPL) platform Atome Financial, viewing it as a strategic shortcut to scale digital lending across South-east Asia despite deferred financial returns.

The Singapore-based super-app on Tuesday (Sep 15) said it will initially acquire a controlling 60 per cent stake in cash – fully funded by its US$5.3 billion-plus cash balance – with Phase 1 closing targeted for the third quarter of 2027.

A second phase will acquire the remaining 40 per cent two years later under a performance-linked valuation framework floored at US$2 billion and capped at US$4.5 billion.

Brokerages described the deal as a strategic buy for US-listed Grab, noting that acquiring Atome’s 25 million cumulative users, 30,000 merchant partners and a US$1 billion gross loan portfolio provides instant scale far faster than organic growth.

Macquarie Capital analyst Zhiwei Foo highlighted that building equivalent underwriting capabilities internally would have required significantly more time and capital. He gave Grab an “outperform” rating and set a target price of US$5.55.

Citi analyst Alicia Yap noted that the transaction preempts regional fintech rivals while enhancing Grab’s “user data flywheel,” driving higher transaction values in key retail and grocery segments.

Delayed payoff

Following the announcement, Grab management raised its 2028 financial year outlook, lifting adjusted earnings before interest depreciation, taxes and amortisation (Ebitda) targets to US$1.7 billion from US$1.5 billion.

It also introduced a US$500 million financial services Ebitda target, while projecting a revenue compound annual growth rate of more than 30 per cent through 2028. Meanwhile, gross loans could exceed US$6 billion, Grab indicated.

These targets comfortably outpace analyst expectations, including Macquarie’s prior US$1.6 billion Ebitda model and DBS’ cited consensus revenue growth of 22 per cent.

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However, because Phase 1 will not close until late 2027, near-term earnings contributions remain limited.

DBS analyst Sachin Mittal noted that the deal is fair at about three times revenue run rate – in line with global BNPL peer average. Still, he emphasised that earnings catalysts are back-end loaded into FY 2028 and gave Grab a “buy” rating with a higher US$5.93 target price.

Citi said it expects Grab shares to trade range-bound in the near term as integration risks are digested, supported by Grab’s accelerated US$900 million share buyback programme.

The company announced the buyback plan on Tuesday as well. It is set to bring its total repurchases since 2024 to US$1.75 billion if fully executed.

The repurchases will be funded from Grab’s existing cash reserves, with its gross cash liquidity at US$7.4 billion and net cash liquidity at US$5.4 billion as at Jun 30.

Assuming the current share price, this repurchase would be equivalent to about 10 per cent of Class A ordinary shares outstanding.

Shares of Grab on the Nasdaq fell 6.8 per cent in the two days after the Atome deal was announced, closing at US$2.87 on Wednesday. The shares have slumped about 56.6 per cent since a peak of US$6.62 in September 2025.

Macquarie attributed Grab’s recent share-price softness to Toyota Motor selling its entire 5 per cent stake in the company, rather than operational weakness.

Foo said he considers this pullback overdone, noting that Grab shares trade at 22 times 2026 price-to-earnings against an expected 2026 to 2028 earnings per share compound annual growth rate of 54 per cent.

CGS International (CGSI) said that the deal’s success depends on whether “growth and synergies from Atome can justify the price, particularly given Atome’s relatively recent profitability”.

Still, risks remain with credit quality, integration and regulatory timing, said CGSI analyst Jacquelyn Yow, who retained an “add” with an unchanged target price of US$4.60.