DBS Group Research analyst Sachin Mittal has maintained his “buy” call on Grab with a lower target price for Grab to US$4.08 ($5.47) from US$4.26 previously on slower-than-expected recovery in tourism, which could slow down the growth in the mobility segment.
In his Jan 19 report, Mittal points out that while Southeast Asia’s tourism exhibited recovery in 2023, challenges still persist as Singapore lags and Chinese tourists numbers stay below expectations.
Southeast Asia’s tourism witnessed a resurgence last year, with notable recovery rates seen in key markets. Malaysia is leading at 26 million visitors, followed by Thailand at 24.6 million and Vietnam at 12.6 million.
Although Singapore is on the path to recovery, it lagged pre-pandemic levels due to lower-than-expected Chinese tourist numbers. “The 12.4 million visitors between January to November 2023 were still significantly below the 19.1 million who visited Singapore in 2019,” Mittal adds.
Vietnam's growth, though significant, remained at 70% of pre-pandemic levels — highlighting regional variations. Cambodia, on the other hand, stood out with a remarkable 92.48% recovery.
The anticipated return of Chinese tourists in 2024 is expected to boost the region's recovery, says Mittal.
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Airport rides are dominated by Grab in Singapore, which grew to 84% of pre-pandemic levels in 3Q2023. The slowdown in tourism recovery could impact these airport rides, impacting Grab’s mobility segment.
Due to this, DBS has lowered Grab’s mobility segment gross merchandise volume (GMV) by 4% and 5% in FY2024 and FY2025 respectively. This brings Mittal’s overall GMV expectations to 1% each below consensus in the two financial years.
“Excluding fintech losses, Grab remains attractive with a 40% discount to Uber,” says Mittal.
Shares in Grab closed 8 cents higher on Jan 18 or 2.74% up at US$3.
