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Grab Holdings Inc. (Grab) is Southeast Asia’s superapp. Formerly known as “GrabTaxi” and “MyTeksi” the company was founded in 2012 and offers services ranging from ride-sharing, food and grocery delivery to financial services, i.e., consumer loans and payments. The business collaborates with retailers and riders to match them with customers while charging a commission to each party.
Grab’s core operations, ride-sharing and food delivery, generate 89% of its income and account for a significant portion of its market share and the company expect to achieve breakeven for its Digibank operations by 2026. The company started in Malaysia as a ride-hailing platform and joined the unicorn club in just two years and diversified its services range further.
Today, Grab operates across multiple segments in almost 480 cities in 8 Southeast Asian countries, including Thailand, Indonesia, Malaysia, the Philippines and Vietnam.
Grab Holdings Business Model
The incentive-reliant company recently released its Q3 earnings and reported a 143% YOY increase in revenue driven by strong growth in Mobility and Deliveries revenue. A loss-making firm, Grab’s Q3 losses shrunk by 65% YOY.
The group-adjusted EBITDA is anticipated at negative $315 m for the second half of 2022, down from the previous forecast of negative $380 m. The company also updated its FY2022 revenue forecast, and now anticipates revenue between $1.32 bn to $1.35 bn.
The SoftBank-backed company rolled out a new initiative called “Just-in-Time” this year to improve estimations of food preparation time and faster delivery with the approximate elimination of 12 million minutes of driver-partner wait time since February 2022. Grab reported an 11% increase in rides every transit hour and 19% higher delivery batch rates as of August 2022. Grab also added Indonesia, Malaysia, Singapore, Thailand and the Philippines to its monthly subscription scheme, “GrabUnlimited”, which offers discounts and perks for a flat monthly cost across a range of services, including food, mobility, and package deliveries.
The Singaporean company wants to strengthen its value proposition of the Grab platform by adding and improving its offerings. “The idea is that it’s an umbrella that can embrace all of the spends that the customer has with us across all the verticals,” Alex Hungate, Chief Operating Officer at Grab, told Nikkei Asia.
Stock Movement
Grab was listed on NASDAQ (GRAB) in December 2021, and has lost nearly 80% value in the past 12 months. Although the company has been forecasted to grow 28.89% per year, Grab shares have been trading below their fair value by more than 20% with analysts predicting unprofitability for at least 3 years.
Having a market capitalization of $12 bn, Grab saw an improvement in its Q3 EPS to negative $0.08 from negative $0.15 during the second quarter. The company currently has a price-to-book ratio of 1.55.
The Road ahead for Grab Holdings Inc.
“Everyday Everything” is the motto of Grab’s super-app. The company has been struggling with investors’ expectations as the demand for deliveries reduced after the economy started reopening and social interactions increased. However, Grab has managed to break even in the deliveries segment in Q3 of 2022, way ahead of schedule, owing to strict cost-cutting.
The company recently announced its expectations to grow 45% to 55% YOY in 2023 on its first investor day on 27 September 2022. “We believe there is a huge runway of growth ahead of us in serving this region and we are well-positioned with our resources to capitalize on the vast opportunities,” noted Anthony Tan, Chief Executive Officer and Co-Founder of Grab, at the event. “We plan to leverage the power of the super app ecosystem as a competitive moat to strengthen our leadership in the region, even as we continue to optimize our costs. We will drive towards becoming Southeast Asia’s largest and most efficient on-demand platform that enables local commerce and mobility.”
The market environment looks promising. Southeast Asia’s IT sector began to flourish in the early 2010s as mobile phone penetration increased throughout the area. According to the Singapore-based analytics company Momentum Works, Grab held a 49% market share of food delivery markets in Southeast Asia, worth a gross merchandise value of $15.5 Bn in 2021, with Foodpanda at 22% and Gojek at 14%.
Except for Malaysia, where Foodpanda’s 49% share edged out of Grab’s 48% share, Grab dominated all other markets. Grab completed the acquisition of the high-end retail chain Jaya Grocer in Malaysia in early, 2022, in a bid to expand logistics and capture a higher market share.
In another significant partnership, Grab Holdings launched the banking app GXC in September 2022 with Singapore Telecommunications Ltd. to offer credit services in the newly liberalised fintech industry. GXS plans to compete by using Grab’s already existing platform to increase its product offerings to the main target the base of gig economy workers and young users. “Our rates will remain competitive, but I think what is important for us when we’re talking to our customers is that there are pain points beyond interest rates,” Charles Wong, CEO of GXS told reporters at the launch event.
Grab is currently concentrating on rebuilding supply to match the rebound in mobility demand post-pandemic while investing heavily in scaling tech and product innovations. “We are driving growth through strategic initiatives like GrabUnlimited, GrabForBusiness, groceries, local partnerships, and advertising,” noted Hungate.
