GRAB

[BigFatWhale]

Is Grab a Worthwhile Investment?

Grab is very much part of our life if you reside in South East Asia- be it hailing a Grab taxi, ordering food from Grab food, arranging a courier service and now even catering to our insurance and financial needs. They have the title of being the SuperApp in South East Asia.

Recently, they have just launched their stock listing in Nasdaq through the merger with Altimeter Growth Corp which is a special purpose acquisition company (SPAC) valuing the deal at $40 billion. Grab raised $4.5 billion with this merger.

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[karlmarx]

Grab has two ride options in its app "Justgrab" and "Standard Taxi". CDG has an app that has the options of "Comfortride" and "Taxi by meter"

The latter for each app are cheaper option and I notice they are priced about the same since it goes by meter.

Grab's "Justgrab" is priced about 10-20% more than the latter options. What is perplexing to me is why for Comfortride, CDG pricing is way higher than "Justgrab". This is because comfort has a fleet of taxis where its drivers are already paying rental to it for owning the taxi. I don't get it why CDG want to get more commission from consumers. If this "Comfortride" is priced the same as "Justgrab", there will be much higher demand for its ride hailing app. After all, CDG has already stood up an app and can reap scale by lowering the price, otherwise not much people will use "Comfortride" and CDG has to absorb the fixed cost of running it.

To me, comfortdelgro taxi management is quite a stupid bunch to not realize this point. This is why Grab is outmaneuvering them in the Singapore market. The management of Grab is seemingly better in this aspect and why CDG is uncompetitive and losing on the taxi front. CDG has the app (technology), infrastructure and fleet. It is not using this to its full advantage and is likely losing revenue and incurring fixed cost as a result. CDG is lucky it has government contracts in public transportation which has become the main profit generator (not vicom); this has probably made the management rest on its laurels because it knows the government contract will save them.

<Not vested in any of them but just looking at how badly one company is run and a start up is fortunate to capitalize on the former mistakes to save its own skin>

So obviously VBs are a car owning community, because it seems that few have been taking much Grab/CDG. 

From my personal experience, I don't find that there is a significant or obvious difference in fares between CDG and Grab. It isn't always the case that Grab is cheaper, for me at least. And actually, CDG has been giving out rebates to customers in the form of "sweet treats," a sure-win lucky draw for up to two rides a week, where the prize range in value from $1 to below $10 (sometimes it is a discount coupon, but mostly it is some fast food). So CDG is certainly not ignoring the competition.

And now that CDG has an app to allow its customers to hail taxis, it is likely that taxi utilisation will improve when covid is over. So this could possibly mean higher incomes for taxi drivers, cetris paribus (taxi rental and market competition).

Grab however has a potentially superior reward system from its multiple businesses, which will only become more entrenched as its active users grow, and when it launches its digital bank. So it will be interesting to see how CDG responds. Alipay is already accepted on CDG, so maybe that partnership will deepen? Or maybe CDG might partner with other services like NTUC. 

A decade of cheap money, venture capital success, internet, smart phones, and numerous computing technology has allowed entrepreneurs to incubate loss-making businesses for probably the longest period ever. Many of the managements of old economy incumbents like CDG may indeed be complacent. But I think the kind of competition they encountered was something which their training did not prepare them for.

Nevertheless, all things considered, I do think there is much for a CDG shareholder to worry.

[Wildreamz]

..

Nevertheless, all things considered, I do think there is much for a CDG shareholder to worry.

Just to clarify, do you mean "do think" or "don't think"?

Would like to point out, perhaps we should not take our experience in Singapore and extrapolate it to other markets. Grab competes in at least 8 different countries. The market they serve is at least an order of magnitude larger than the local market. And these markets are probably 1 order of magnitude harder than Singapore for Grab to corner by easy money alone.

(not vested)

[specuvestor]

Revenue $122 million, -44% y/y
Adjusted Ebitda loss $305 million vs. loss $102 million y/y, estimate loss $227.3 million
Gross merchandise value $4.50 billion, +26% y/y
Monthly transacting users 26 million, +2.8% y/y

Expects 1Q 2022 deliveries GMV to be between $2.4 billion to $2.5 billion
Expects 1Q 2022 mobility GMV to be between $0.75 billion to $0.80 billion
Expects 1Q 2022 Financial Services Pre-InterCo TPV to be between $3.1 billion to $3.2 billion
Expects GMV growth for each of the quarters from Q2 to Q4 2022 to accelerate to 30 - 35% YoY, subject to shifts in the Covid-19 environment
Grab targeting steady state Adjusted Ebitda to GMV margins of 12% in mobility and 3% in deliveries

(Bloomberg) Grab Holdings Inc.’s stock plummeted 37% on Thursday after the company reported wider losses in the fourth quarter, pushing to $22 billion the decline in its market value since it went public through a merger with a blank-check firm in December.
Southeast Asia’s ride-hailing and delivery giant has plunged 63% since its debut, placing it among the Nasdaq Composite Index’s worst performers over that stretch. Thursday’s drop marked its biggest selloff ever after the Singapore-based company’s quarterly net loss nearly doubled from last year while revenue shrank 44%. The tumble came as 116 million shares changed hands, more than four-times the average over the past month.

-SNIP-

But while spending by customers on Grab’s platform is increasing, the growth isn’t yet translating to earnings. Revenue booked from delivery last quarter was just $1 million. Grab deducts incentives that it offers to drivers and consumers from sales, and its quarterly revenue number fluctuates wildly depending on how much it spends on such efforts. 
Its total spending on incentives more than doubled to $583.5 million in the fourth quarter. For 2021 as a whole, incentive spending soared to $1.78 billion from $1.24 billion the previous year.

Grab has been burning cash, at the peak about S$1b annual, competing with Uber and I think that business is slight positive now. You don't see much incentives or offers from Grab ride business nowadays

However they are now burning cash from food business. It makes strategic sense if the ride business can subsidise the food business growth but again it won't be profitable until someone blinks. In my opinion they probably should plan for a normalised post-COVID in 2022, notwithstanding omicron variant, that will reduce demand and volume for delivery.

[Wildreamz]

I am not optimistic. Every part of their business is challenged. Their most promising business that I'm aware of, Grab Pay (ie Mobile Wallet), is losing out to ShopeePay even though the latter is launched later.

Ride-hailing is an inherently poor business (zero/small differentiation between platforms; poor value-add by most platforms, including Grab (ie they extract much more value than they provide, IMHO); margins are vulnerable to competition and future regulations). And that is their most profitable business arm.

Not counting them out completely, but it's a long shot as a long-term investment, for now.

Edit: Right now, at best, they seem like Uber/Lyft for countries with lower spending power. Uber and Lyft are still underwater from their IPO price.

(not vested)

The collapse in their stock price is completely unsurprising to people that paid attention. 

Will not count them out completely, but even at today's price, moving forward, I cannot see any reason to invest in Grab, unless you are betting on a buyout by an acquirer in the near future. Not a game I like to participate in. 

(no positions)

[CY09]

People are betting that they will be the winner in their segments

In the food delivery, they seem to be doing well with improving margins but overall it is still loss making. What surprised individuals was Q4 2021 revenue where it is shown they were paying a lot of incentives to riders despite increasing commissions levied on food outlets. Essentially they were earning close to nothing and had to provide the infra.

Mobility had the same issue where they had to pay more incentives. This signals stiffer competition.

Slide 41 on the incentives breakdown is one of the most important reference to read, always delivering the bad news last.

It shows excess incentives and those to consumers have grown a lot which signals possible competition from Sea Group, Delivery Hero and Gojek. A sign of competition. Consumer incentives have grown a lot as well. With Sea Group having a warchest and infringing with them on deliveries for supermart items and financials, I would expect the cash war to continue until 2025 where one collapses

https://investors.grab.com/static-files/...f5cc2c42d0

[dydx]

The problems for Grab :
1) Consumers - only buy more food delivery or rides if there are incentives, otherwise fall back on other apps or regular taxi and other cheaper mode of transport.
2) Driver/delivery partners - will continue to take businesses from apps which provide the best incentives or earnings, after commissions.
3) Merchants - will sell through Grab and pays the 30% commission only if it makes sense or no other alternatives.

Combining the above 3 players/stakeholders, the conclusion is likely very difficult to build support and loyalty from all 3 at the same time without doling out incentives. Jialat!

[CY09]

I am pretty sure Grab wont be subsidizing forever. Its a winner takes all strategy, upon victory they will start upping the price like in defeating Uber case and build a moat which go-jek is trying to take down

Their competitors are as follows and my verdict thoughts;

Mobility- Gojek (GoTo), Verdict: Grab should win because they have created a lingo in its markets and brand trust.
Food Delivery: Foodpanda, Verdict: Unknown- likely Grab, both burning money like crazy but Grab has bigger warchest
Mart Delivery: Lazada, Shopee. Verdict: Lazada, big backer
E Wallet: Sea, GoTo, Verdict: Sea Group, larger warchest

If i were to value, its only the mobility and Food delivery where its worth. In my opinion, its not worth much because there is a restricted market size of South East Asia who has limited wealth in mobility services

[dydx]

For Mobility, in SG, apart from Gojek, we have the 6 local taxi companies/brands, MRT and bus service, and bicycle and motorbikes, not counting walking for short distance.
For Food Delivery, in SG, after Covid, many will be going out to eat again, so only those who still need to sell on GrabFood, FoodPanda or Deliveroo, will continue to use them and pay the 30% commission.
For E-Wallet, it is a 'sidekick' business very much tied to Mobility and Food Delivery.

As it is, Grab is behaving like a social enterprise, providing basic services, employment, and delivering orders to its merchants, and at the same time subsidising the 3 groups of stakeholders, all because investors and the stock market still look at disruptive tech business with interests.

[Big Toe]

From the very start it is a story based business. The economics of the business as a whole currently is complete rubbish. Much of this can be attributed to strong competition but even if one competitor exits, another will come in. Even if the eventual "winner" is grab, what is the cost of becoming the winner? How much cash is burnt during the process? And can the winner recoup even some of its cash burnt during the prior years? And will new competitiors not come in to challenge the "winner" when there is money to be made? And the "stickiness" and "loyalty" to an app is completely tied to the price of a good or service.

The only way to grow is to burn more cash. The more money is brunt, the further away from profitability.

As there isnt even a timeline where it can break even, the company cannot be valued. The GMV metric that a lot of story based companies use is also completely ficticious. It does not matter if the GMV is in the trillions, it is the ability to convert that into profit that matters.