Citi sees savings, margin upside if Grab acquires GoTo

Citi keeps a Buy rating on Grab Holdings (GRAB) with a $5.90 price target after Bloomberg reported that merger talks between Grab and GoTo group have gathered steam recently. The firm expects “few positive synergies” if the reported news materialized this time. If the companies were merged, Citi would expect savings on aggressive user subsidies and positive margin upside, a faster pace of new user acquisition with broader product offerings and lower-tier cities penetration, better user targeting through improved segmentation focus, higher merchant monetization through cross-selling financial services, and increasing advertising revenue, the analyst tells investors in a research note. The firm believes both brands and apps would likely remain independent post a potential merger. The combined companies would control and cover 80%-90% of on-demand services in Indonesia and a larger mind share of digital wallet and financial services, Citi says.