GRAB Holdings Ltd expects sharply slower revenue growth next year as the South-East Asian (SEA) Internet giant adjusts to a market downturn and speeds up efforts to reverse years of losses.
The ride-sharing and delivery provider gave the forecast for a 45% to 55% increase at its first investor day, trying to reassure shareholders it’s on the rebound. Analysts were projecting 49% growth for 2023 on average. The company backed by SoftBank Group Corp also said it anticipates breaking even in the second half of 2024 (2H24) on a conditional basis, and excluding one-time items.
Grab, long considered one of the rising stars of SEA, has struggled since it went public through a merger with a special purpose acquisition company in December. Shares have tumbled more than 70% as the company racked up losses in the post-Covid era and the stock market soured on unprofitable tech ventures. Grab, which went public by merging with Altimeter Capital Management’s special-purpose acquisition company in what was originally a US$40 billion (RM183.6 billion) deal, is now worth about US$10.8 billion.
“Looking ahead, we’re firing on all cylinders to improve our profitability trajectory,” CEO Anthony Tan said at the event in Singapore on Tuesday. “Grab is trying to achieve this by growing our top line in a sustainable manner.”
Grab, which counts Japan’s SoftBank and Uber Technologies Inc as two biggest shareholders, expects losses to narrow to US$380 million on an adjusted basis in 2H22. Executives said it now aims to break even by the latter 2H24 on an adjusted earnings basis before interest, taxes, depreciation and amortisation (Ebitda). That excludes as many as a dozen exceptional items, from fair value losses in investments to “restructuring costs”.
“It’s the right strategy, although the market is less patient now,” said Sachin Mittal, an analyst at DBS Group Holdings Ltd, who rates Grab a ‘Hold’. He had estimated revenue growth of 77% for 2023 and adjusted Ebitda breakeven in 2025. In the meantime, the company said it has about US$6 billion of cash and liquid items on hand, giving it time to turn its on-demand and fintech services around.
Tan’s vision of creating a so-called superapp for SEA was aggressive, but led to extensive losses. Grab lost US$3.4 billion in 2021 and has piled up almost US$1 billion of losses in the first two quarters of this year. Revenue this year is set to roughly double to as much as US$1.3 billion, Grab said last month.
The company started out focused on the ride-hailing business and competed effectively against Uber. The US company ended up selling Grab its business in SEA in return for a stake in its Singaporean rival. Grab then launched an ambitious — and expensive — campaign to expand into adjacent businesses, including food delivery and finance. It also added everything from hotel bookings and health services to gifts and entertainment experiences to its app.
Alex Hungate, who joined Grab as COO in January after heading SATS Ltd and HSBC Singapore, said the firm will now have a more defined strategy. He outlined an effort to make the company “SEA’s largest and most efficient on-demand platform that enables local commerce and mobility.”
“This is not just a bunch of words on a page,” Hungate, 56, said during his presentation. “This defines our strategy in a more focused way than we’ve ever defined before.” In a separate interview, he said Grab aims to focus on product efficiency, such as just-in-time allocation of orders so its drivers can handle more of them.
Grab also plans to expand its monthly subscription programme, where users pay a flat fee for deals across mobility, food and parcel delivery services on its app. It will also focus on corporate customers, groceries and advertising and fintech services to boost profitability.
The company is counting on turning around its loss-making delivery and financial-services businesses to hit its profit target. It’s previously forecast its deliveries division will get into the black by the second quarter of next year, when it should have margins of at least 3%. Grab expects its digital bank operation, run with Singapore Telecommunications Ltd, to break even only by 2026.
“It’s sharpening of focus,” Hungate said in the interview. “Because superapp could be interpreted as being all things to all people; that’s not what we intend to do. We are very clear about what we want to focus on.” — Bloomberg