Macro uncertainty caused by tariffs could slow the growth trajectory of the digital economy, especially for players reliant on discretionary consumer spending, Maybank Investment Bank said in its note on last Thursday.

According to the research house, although ASEAN internet players have no US exposure and as such are not directly in the path of tariff wars, a macro slowdown and less private consumption in the wake of the tariff war may have an indirect impact on
these companies.

Other areas of downside include a halt in seller take rate increases, lower advertising spending, slower credit expansion/higher provisioning and reduced mobility demand, particularly in markets reliant on tourism/business travel.

“Our sensitivity analysis suggests -24 percent and -18 percent downside to FY26 adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of Sea and Grab, respectively,” said Maybank.

Applying the trough enterprise value (EV)/sales multiple of the 2022-23 down cycle, the research house sees 40 percent and 16 percent downside to Sea and Grab’s current share price.

“We see this as the worst-case scenario and as such expect only a mild slowdown in the event of moderate macro easing as companies are not directly exposed to tariffs,” it noted.

According to the research house, in markets reliant on tourism/business travel, ride-hailing platforms could also see reduced demand for such services.

“In the wake of tariff uncertainties, our macro team has revised down its real gross domestic product (GDP) growth expectations for ASEAN markets by -0.2 percentage points to -1 percentage points, and for private consumption by 0 percentage points to -1.1 percentage points for 2025-2026,” it added.

Overall, Maybank believes Sea and Grab’s growth in the first quarter was strong year on year, in line with their bullish full-year guidance issued at the start of the year.

The research house expects Sea and Grab’s first quarter gross merchandise value (GMV) increased 19 percent/15 percent, and adjusted EBITDA rose 83 percent/57 percent year on year.

It noted that on a quarter on quarter basis, some softness is expected due to seasonality caused by the Lunar New Year and Lebhran.

“Our revenue estimates are broadly in line with the street’s, but our adjusted EBITDA estimates are 3 percent to 14 percent ahead of consensus,” Maybank said, adding that consumption-driven growth of Sea and Grab won’t be spared if the economy slows.

In a worst-case scenario, it estimated up to 40 percent and 16 percent downside to Sea and Grab’s share prices, though a milder impact is likely under moderate conditions.

Maybank also trimed its forecasts for Sea and target price by 1 percent to 5 percent.

The research house estimated Sea’s first quarter revenue and adjusted EBITDA rose 32 percent and 83 percent year on year.

“We expect e-commerce GMV rose 19 percent year on year, but fell 2 percent quarter on quarter due to seasonality,

“However, monetization initiatives of last year and early this year should allow for adjusted EBITDA expansion of $255 million year on year (+53 percent quarter on quarter),” it said.

It noted that Sea e-commerce adjusted EBITDA estimate is 50 percent ahead of street expectations.

“We expect digital financial services (DFS) revenue growth at a higher clip versus ecommerce GMV growth,

“We expect Garena’s revenue growth at 12 percent year on year/6 percent quarter on quarter, and sequential margins expansion, helped by higher festive spending and lower operating expenditure (opex) given absence of major events,” Maybank said.

As for Grab, Maybank estimated the firm’s first quarter revenue and adjusted EBITDA rose 19 percent and 57 percent year on year.

The research house expects Grab’s on-demand GMV grew 15 percent year on year, but declined 3 percent quarter on quarter.

The quarter on quarter decline was mainly due to the seasonality caused by Ramadan fasting, but partially offset by superior growth in grocery sales.

Competition remains highly rational while an increasing supply of drivers should have allowed for 9 percent quarter on quarter reduction in incentives in the first quarter.

“Note that higher incentives in the fourth quarter of 2024 was the key investor concern earlier this year, which we expect to abate post-first quarter results,

“That said, fintech adjusted EBITDA losses may have widened owing to upfront provisioning,” said the research house. 

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