Brokers’ take: Maybank says raised US$2.83 target on Grab still overvalued

Michelle Zhu
Published Mon, Aug 29, 2022 · 12:53 PM

MAYBANK Securities has upped its price target on the ride-hailing operator to US$2.83 from S$2.29 upon attributing higher enterprise value (EV) multiples to Grab’s delivery and mobility segments to reflect their stronger prospects for profitability.

This comes after the group reported its third consecutive quarter of improved adjusted Ebitda (earnings earnings before interest, taxes, depreciation, and amortisation) as a percentage of gross merchandise value (GMV), although its second quarter results missed expectations of both the research house and the street.

Maybank continues to rate the stock at “sell” following its July downgrade, while noting that its new price target “still appears overvalued”. 

In a report on Friday (Aug 26), Maybank analyst Samuel Tan expressed growing confidence in Grab’s mobility segment, which reported strong on-year GMV growth in Q2 due to reopening demand.

The research house now values the mobility segment at a higher EV-per-share multiple of 1.8 times due to “consistently better” adjusted Ebitda as a percentage of GMV margin, as benchmarked against Uber. This is despite the smaller scale of Grab’s mobility segment.

It also raised its EV-per-share multiple on the delivery segment to 1.4 times from 0.9 times previously, as delivery adjusted Ebitda as a percentage of GMV narrowed in Q2 to 1.4 per cent from -2.2 per cent in Q1 of FY2022.

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Maybank however lowered its FY2023 delivery revenue forecast by 22 per cent to US$976 million, as it sees growth slowing from the group’s profitability initiatives as well as food inflation. Both factors will be demand destructive for food delivery as a discretionary service, said Tan.

While Tan believes the bottom may be nearing for Grab with “increasing clarity” based on management’s revised FY2022 financial guidance, he highlights the risks that remain for the stock.

“The impact of rising interest rates and an inverted yield curve on Grab and other tech stocks appears to have weakened, but global monetary policy actions remain hawkish,” he said. 

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