Grab Earnings: Concerns Overblown on Delivery GMV Decline; Grab the Shares

We think the market has overreacted to Grab’s first-quarter performance, where delivery segment gross merchandise value fell 9% year on year, while ignoring a 46% year-on-year increase in mobility GMV. We view the 15% share price fall as an opportunity to buy the shares, and retain our $3.80 fair value estimate. We regard first-quarter revenue of $525 million, up 130% year on year, as being in line with our forecast, making up 21.5% of our original full-year estimate. It is generally a softer period due to seasonal factors. We believe Grab’s share price may have been dragged lower after slower growth in peer Sea as well as Alibaba, again raising concerns over a consumption slowdown and intensifying competition. We tweak our assumptions, mainly to reflect better cost containment, leading to reduced net losses. But we see limited improvement in working capital and free cash flow, resulting in our unchanged intrinsic valuation.