Grab Holdings will be included in the MSCI World Index. The announcement was made by the equity index compiler in a statement late Wednesday after the market closed, as part of the 2022 Quarterly Index Review for the MSCI Equity Indexes. The changes will take effect from market close on 28 February.
Grab Holdings is the largest single inclusion by market capitalisation. The Singapore-headquartered company will be added to the index along with 20 other securities from around the world.
The inclusion of Grab in this prestigious index has driven the stock higher in pre-market trading – it is up by 8%.
We reiterate our Buy recommendation on Grab with a target price of US$12.90, implying 132% upside.
Grab will report its maiden results for Q4 21 on 3 March. Two variables for investors to watch are:
1. Net revenue
We expect the company to exceed the market's net revenue expectation of US$731mn, coming in at US$798mn. The reason for our confidence is that the food delivery segment is likely to deliver strong returns. In FY 21, we expect 55% adjusted net sales growth in food delivery.
The stock is likely to trade on two non-financial metrics – Gross Merchandise Value (GMV) and Monthly Transacting Users (MTU). Clients seem to be focusing more on these metrics and we expect them to be strong – we expect a 29% qoq rise in GMV per MTU.
2. EBITDA
Grab's mobility EBITDA margins are rising and we expect it to expand in FY 23. Grab is looking to offer aggressive incentives and expand its regional dominance versus its rival GoTo.
While Grab is on track to match our forecasts for Q4 21, we expect growth to accelerate further in the mobility segment, which will drive net revenue growth of over 49% in Q1 22 on a qoq basis. Recently, Singapore and Indonesia (Grab's core markets) have eased work-from-home requirements, which is a positive for the mobility segment.