Maybank Investment Bank said Thursday that it foresees ASEAN internet players such as Sea, Grab and GoTo to lead growth ahead of global peers.

The research house said in a note that these domestic companies delivered an all-round performance in the third quarter of 2024, gained market share (versus Lazada or FoodPanda) and achieved growth that is in line/ahead of global peers (such as MELI or DHER).

It also noted that financial services stood out with gross transaction value (GTV)/loans/revenue growing about 2 times of the core e-commerce/on-demand services, and it expects the momentum to sustain, helped by the flywheel effect.

“With estimated forward growth ahead of global peers, we increase our target multiple for Grab and Sea in our SoTPs valuation,

“We lift our target price for Grab to $6.20 (from $5.40) and Sea to $130 (from $125). (We) reiterate buy (on them),” said Maybank.

According to the note, ASEAN gross merchandise value (GMV) growth in the third quarter (up 23 percent year on year/7 percent quarter on quarter) remained ahead of the global peers by 6 to 14 percentage points year on year and 3 to 8 percentage points quarter on quarter, and broadly in line with Indian peers (up 22 percent year on year/6 percent quarter on quarter).

“We find the domestic players continue to reinforce their position in ASEAN,” said the research house.

It is noted that disclosure by Alibaba’s IDCG suggests Lazada’s revenue grew by less than 35 percent versus Shopee at 43 percent year on year.

Delivery Hero’s AsiaPac (which houses FoodPanda) GMV declined 3 percent year on year (versus +16 percent for Grab).

“We continue to find Temu’s pricing in ASEAN is less competitive than peers and as such we don’t expect it to be able to make a mark yet,

“We expect momentum/monetization improvement to sustain in the fourth quarter, helped by healthy macro, strong tourism, slight consolidation and relatively stable competition (besides initiatives such as new lending products and local
services etc),” Maybank said.

According to the note, in the third quarter of 2024, financial services surprised the most, delivering 42 percent revenue growth and 75 percent loan growth – beating expectations by 10 percent to 15 percent.

“ASEAN’s high unbank/underbank population creates a significant untapped opportunity, and the pieces are finally in place, which in turn could pave way for fintech to emerge as a prominent force – Grab’s rollout of digi loan services in Indonesia/Malaysia, e-commerce/on-demand scale and stabilization in competition are leading companies to optimize/push fintech growth,

“As companies have already developed tech stack, scale and consumer intelligence will help to scale up financial services without incurring high customer acquisition costs or credit losses, in our view,” said Maybank.

With competition stabilizing and post-Covid growth recovery, Maybank sees these ASEAN internet companies have consistently turned free cash flow (FCF) positive and are close to net profit after tax (NPAT) positive.

According to the research house, these companies balance sheet positions as well remain strong with each of them holding $1.4 to $7 billion in cash.

New growth initiatives are in place, but unlikely to need material investments while inorganic opportunities are also limited, it said.

“However, analyzing the global companies in the space that are ahead of the ASEAN peers, we believe cash return through regular dividends is unlikely,

“That said, looking at the global precedents, we see high cash buffer can be fast deployed for shares buybacks in the event of extreme stock volatility,” it added.

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