Brokers’ take: DBS cuts Grab target price, expects slowdown in mobility segment
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Vivienne Tay
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DBS Group Research on Friday (Jan 19) trimmed its target price on Grab to US$4.08 from US$4.26, but kept its “buy” recommendation.
The cut came after the research team revised its adjusted earnings before interest, taxes, depreciation and amortisation (Ebitda) estimates for FY2024 to US$477 million from US$511 million, excluding fintech losses.
The new target implied a potential upside of 36 per cent from the counter’s closing price of US$3 on Thursday, and 35 per cent from its after-hours closing price of US$3.0203.
DBS valued Grab’s fintech business at 3.5 times gross revenue for FY2025, in line with its peers. The group is trading at an enterprise value (EV), which is 13.2 times the adjusted Ebitda, and offers an Ebitda compound annual growth rate (CAGR) of 54 per cent, DBS noted.
Its competitor Uber, meanwhile, is trading at an enterprise value which is 22 times the adjusted Ebitda. It offers an Ebitda CAGR of 42 per cent.
“We like Grab’s ability to gain market share from standalone mobility or delivery players,” DBS said.
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That being said, it foresees a potential slowdown in the group’s mobility segment due to a slower-than-expected recovery in tourism, which drives the growth of airport rides.
Singapore lagged behind other markets in South-east Asia in 2023 due to lower-than-expected Chinese tourist numbers. However, the anticipated return of Chinese tourists in 2024 could boost the region’s recovery, DBS said.
It expects adjusted Ebitda losses for the group’s fintech segment to “reduce significantly” in FY2024 from a drop in funding costs for the payment business, coupled with a rise in the lending business.
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