CGS International upgrades Grab to ‘add’, raises target price to US$7 on financial services turnaround

[SINGAPORE] CGS International has upgraded its recommendation on Grab to “add”, from “hold” previously, and raised its target price by 29.6 per cent to US$7 from US$5.40 as the brokerage takes on a more positive outlook on the company’s financial services segment.

The way CGS International analyst Jacquelyn Yow sees it, Grab’s financial services is “on a turnaround path”. She noted in an Oct 3 report that losses are expected to “narrow sharply”, with the segment forecast to reach operating breakeven by end-2026.

Hitting this stage would be “a major milestone” for the company, “underscoring the management’s confidence in the segment’s profitability trajectory”, she said.

She also expects all three of Grab’s segments – financial services, deliveries and mobility – to be positive on an adjusted earnings before interest, taxes, depreciation and amortisation (Ebitda) basis for the first time from FY2027.

For the third quarter ended September, the analyst expects the company’s financial services revenue to increase 50 per cent year on year to US$96 million, citing “deeper GrabFin lending penetration within Grab’s ecosystem partners and users”, as well as “higher digital bank loan disbursements growth for the digital banks, with more credit products”.

Grab is expected to announce its Q3 FY2025 results on Nov 4.

Overall growth expected for Q3

For the period, Yow projects adjusted Ebitda losses for the financial services segment to narrow to US$24 million, on the back of lower expected credit loss provisions and scaled loan disbursements.

She estimates the segment’s Ebitda losses will shrink by half to US$43 million in FY2026, from a forecast Ebitda loss of US$103 million for FY2025, “primarily due to lower expected credit loss allowances, driven by improved risk models after one to two years of merchant and customer data collection”.

She noted that from 2022 to 2024, credit loss allowances declined to 9 per cent from 12 per cent, while the loan book grew an average of 70 per cent year on year. This continued decline would support earnings growth for the segment, she added.

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As for Grab’s deliveries, the platform is forecast to register revenue of US$468 million for Q3, up 23 per cent year on year. Yow expects the segment’s gross merchandise value (GMV) to expand 24 per cent year on year to US$3.7 billion, thus “outpacing mobility growth”.

“Despite early September protests in Indonesia affecting some ride-hailing drivers, the delivery segment benefited from the work-from-home trend, partially offsetting slower mobility GMV growth due to reduced traffic and fewer riders,” the analyst said.

Grab’s Q3 mobility revenue is projected to rise 16 per cent year on year to US$314 million. Yow forecasts an 18 per cent year-on-year GMV growth to US$2 billion for the segment, due to “more product offerings and sequential growth”.

The mobility margin is expected to remain stable, in light of increasing daily and monthly transacting users as well as Grab’s user engagement initiatives. For instance, the platform launched eco-friendly vehicles in Q2 2025, which featured “proprietary (artificial intelligence)-powered safety tech and integrated fare systems in Singapore”.

Overall, Yow expects Grab’s group revenue for Q3 to rise 23 per cent to US$881 million, bolstered by substantial year-on-year GMV growth for Grab’s deliveries and mobility segments, in addition to continued loan book growth in financial services.

She forecasts the group’s adjusted Q3 Ebitda to expand 38 per cent year on year to US$124 million. She attributes this to the deliveries segment notching stable to slight improvements in margins, resilience in mobility margins driving sequential earnings growth, and narrowing adjusted Ebitda losses from the financial services segment.

Shares of Grab closed at US$6.39 on Monday (Oct 6) on the Nasdaq, up 3.7 per cent in the year to date.