GRAB HOLDINGS LIMITED(GRAB.US)：DELIVERY TURNS PROFITABLE FOR FIRST TIME

　　3Q22 results beats our expectations
　　Grab Holdings reported 3Q22 results: Revenue increased to US$382mn, up 143% YoY and 19% QoQ, beating Bloomberg consensus of US$345mn. The result was driven by strong demand recovery and monetization of the firm’s mobility and delivery businesses, in our view.
　　The firm’s 3Q22 adjusted EBITDA loss improved from -US$233mn in 2Q22 to -US$161mn in 3Q22, driven by fewer incentives in the mobility and delivery businesses. Adjusted EBITDA (pre-regional cost) improved from -US$19mn in 2Q22 to US$47mn in 3Q22, with improved margins and optimized incentive spending in the delivery business. The food and delivery businesses have achieved breakeven two and three quarters ahead of management guidance.
　　Trends to watch
　　FX fluctuations to contribute 6% to GMV top-line loss. We expect the continued strength of the US dollar to drag gross merchandise value (GMV) by about 6% or US$260mn in 4Q22.
　　Mobility business grew strongly on robust demand and recovering driver supply. GMV of the mobility business grew to US$1.09bn in 3Q22, up 105% YoY and 5% QoQ, due to surging demand amid eased travel restrictions. Adjusted EBITDA improved to US$135mn, up 112% YoY and 8% QoQ, which translated to a 12.5% margin on the back of lower incentives for drivers and consumers. The average number of monthly active drivers in 3Q22 was 80% of its pre-COVID-19 level, according to the firm. We believe the growth momentum in Grab’s mobility business may be sustained due to the improved onboarding process for drivers and its partnerships with car rental firms.
　　Delivery profitability improved despite normalizing demand. In 3Q22, GMV of the delivery business was US$2.44bn (up 5% YoY, down 1% QoQ), impacted by forex fluctuations and demand normalization. Adjusted EBITDA was positive for the first time, improving from -US$34mn in 2Q22 to US$9mn in 3Q22. We see improving profitability over the next few quarters as consumer incentives may be reduced, in line with industry trends, and due to management’s heightened focus on profitability, high-quality GMV and transaction volumes.
　　DFS grew steadily but costs may remain elevated as Digibank develops despite disciplined cost management. The total payment value (TPV) of the digital financial services (DFS) business was US$3.83bn in 3Q22, up 22% YoY and 1% QoQ. Revenue was US$20mn, up 44% YoY and 54% QoQ, driven by higher GMV and a greater contribution from the lending business. Due to disciplined cost management of GrabFin’s operations, the 3Q22 adjusted EBITDA loss narrowed to -US$104mn, from -US$115mn in 2Q22. Despite improved management, we expect costs to be relatively stable as Digibank continues incurring expenses.
　　Financials and valuation
　　We revise upwards our forecast for 2022 revenue by 3% to US$1.33bn (up from US$1.29bn) in view of better monetization of the delivery business due to tapering incentives. We revise downwards our forecast for 2023 by 7% to US$2.02bn (down from US$2.17bn) due to our conservative projection on demand for ride hailing pending fresh catalysts such as full resumption of international travel.
　　We revise slightly downwards our 2022 adjusted EBITDA forecast from-US$831mn to -US$838mn due to bigger-than-expected regional costs. Our 2023 adjusted EBITDA forecast is revised downwards from US$12mn to loss of -US$128mn based on a more conservative projection of ride-hailing GMV which leads to smaller contribution to profit. Overall, we believe the effects of management’s profitability drive should continue playing out in 2023.
　　Following a change in investor sentiment, we believe that monetization and profitability assumptions are critical to the long-term valuation of internet companies. We maintain a valuation method that normalizes 2024E EV/EBITDA discounted back to 2023 at 7.1% for delivery services (rebasing the valuation year from 2025E to 2024E in view of stronger profitability and monetization), 2023E EV/EBITDA to value mobility services, and 2023E P/S to value DFS, given the business is still in its infancy. We maintain OUTPERFORM but cut our TP from US$5.20 to US$5.00, offering 55% upside.
　　Risks
　　Competition risks; regulatory risks in mobility business; growth uncertainties in DFS business.
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   【免责声明】本文仅代表第三方观点，不代表和讯网立场。投资者据此操作，风险请自担。