Grab Earnings: Raising Fair Value Estimate by 16% to $4.40 As New Long-Term Catalysts Are Emerging

We raise our fair value estimate for no-moat Grab to $4.40 from $3.80 after it reported second-quarter 2023 revenue of $567 million, which was 4% better than our estimates, but more importantly, we expect two new catalysts that are likely to provide incremental long-term revenue to our estimates. The first catalyst is the emergence of its advertising business, which could incrementally add 1.5%-2% of the delivery gross transactional value, or GTV, to its revenue and contributes to the bulk—about 10%—of our valuation increase. The other is the revenue reacceleration of its delivery unit, which was stagnant during the pandemic. We view that Grab has a valuation floor based on the dominant position of its mobility unit in Southeast Asia. Coupled with its incremental catalysts, we think that Grab should see upward revisions to its long-term estimates and revenue trajectory.