Pui! Grab is sucking the blood

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Pui! Grab is sucking the blood of its drive n delivery partners to grow itself.

Grab: Reducing Costs And Growing Through Tourism

Grab offers deliveries, mobility, and financial services in Southeast Asia, with a stock price down 70% since its IPO in 2021.Grab has a dominant market share and a strong brand name. The company will continue to grow due to its newer financial services segment and the rise of tourism in Singapore.Despite initial losses, Grab's increasing cost-efficiency and profitability, along with growth in customer base, make it a buy.Editor's note: Seeking Alpha is proud to welcome Sameer Essa as a new contributing analyst. You can become one too!

Grab: Reducing Costs And Growing Through Tourism

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Grab is sucking the blood of its drive n delivery partners to grow itself.&nbsp;</p></body></html>","htmlText":"<html><head></head><body><p>Pui! Grab is sucking the blood of its drive n delivery partners to grow itself.&nbsp;</p></body></html>","text":"Pui! Grab is sucking the blood of its drive n delivery partners to grow itself.","highlighted":1,"essential":1,"paper":1,"likeSize":6,"commentSize":0,"repostSize":0,"favoriteSize":0,"link":"https://ttm.financial/post/320266714194000","repostId":2444212056,"repostType":4,"repost":{"id":"2444212056","kind":"highlight","pubTimestamp":1719210853,"share":"https://www.laohu8.com/m/news/2444212056?lang=&edition=full","pubTime":"2024-06-24 14:34","market":"us","language":"en","title":"Grab: Reducing Costs And Growing Through Tourism","url":"https://stock-news.laohu8.com/highlight/detail?id=2444212056","media":"seekingalpha","summary":"Grab offers deliveries, mobility, and financial services in Southeast Asia, with a stock price down 70% since its IPO in 2021.Grab has a dominant market share and a strong brand name. The company will continue to grow due to its newer financial services segment and the rise of tourism in Singapore.Despite initial losses, Grab's increasing cost-efficiency and profitability, along with growth in customer base, make it a buy.Editor's note: Seeking Alpha is proud to welcome Sameer Essa as a new contributing analyst. You can become one too!","content":"<html><head></head><body><ul style=\"\"><li><p>Grab offers deliveries, mobility, and financial services in Southeast Asia, with a stock price down 70% since its IPO in 2021.</p></li><li><p>Grab has a dominant market share and a strong brand name. The company will continue to grow due to its newer financial services segment and the rise of tourism in Singapore.</p></li><li><p>Despite initial losses, Grab&#39;s increasing cost-efficiency and profitability, along with growth in customer base, make it a buy.</p></li></ul><h2 id=\"id_2283365482\">Investment Thesis:</h2><p><a href=\"https://laohu8.com/S/GRAB\">Grab</a> is a Singapore-based superapp that offers deliveries, mobility, and digital financial services for individuals and institutions across eight countries within Southeast Asia; namely, Singapore, Cambodia, Indonesia, Malaysia, Myanmar, the Philippines, Thailand, and Vietnam.</p><p>Its stock price is down roughly 70% since its IPO in 2021 because, much like many other superapps, it has been operating at a loss for multiple years. Its first profitable quarter was 2023Q4, which was followed by another unprofitable quarter.</p><p>Despite short-term profitability issues, I believe the company’s increasing cost-efficiency and profitability, paired with its continuing growth in customer base, make it a buy.</p><h2 id=\"id_2803730215\">Three Business Segments:</h2><ul style=\"\"><li><p>Mobility: As Grab’s oldest business, Grab’s ride-hailing segment has been quite dominant. In 2018, Grab acquired Uber Southeast Asia to expand their delivery and transportation businesses.</p></li><li><p>Deliveries: Grab’s suite of delivery services were launched in 2015. After acquiring Malaysian supermarket chain Jaya Grocer, Grab’s grocery delivery business – GrabMart – grew substantially. Grab’s delivery and mobility businesses account for 89% of its revenue.</p></li><li><p>Financial Services: Launched in 2017, Grab’s financial services segment is the newest and smallest of Grab’s businesses. In 2021, Grab bought a 90% stake in Indonesian mobile wallet company OVO. GrabPay offers lending, “buy now, pay later,” and insurance services.</p></li></ul><h2 id=\"id_3931115913\">2024 First Quarter Report:</h2><p>Grab’s 2024Q1 report showed a decrease in operating loss from $125 million to $75 million, as well as a $129 million rise in adjusted EBITDA. Despite the seasonal challenges of Chinese New Year festivities and Ramadan, Grab’s Mobility and Deliveries businesses showed a 19% increase in monthly transacting users (MTUs) year-over-year.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/847dca533fea1fb4df962d61a4334601\" alt=\"Grab 2024Q1 Investor Presentation\" title=\"Grab 2024Q1 Investor Presentation\" tg-width=\"833\" tg-height=\"402\"/><span>Grab 2024Q1 Investor Presentation</span></p><p>Additionally, Grab’s financial services segment saw a 64% increase in total loans disbursed YoY.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/9d5b66ecb0295463d6a62987590dd61e\" alt=\"Grab 2024Q1 Investor Presentation\" title=\"Grab 2024Q1 Investor Presentation\" tg-width=\"490\" tg-height=\"191\"/><span>Grab 2024Q1 Investor Presentation</span></p><p>2024 Adjusted EBITDA guidance was raised from $180-200 million to $250-270 million. Revenue guidance was, on the other hand, held static at 18%. I believe Grab will meet its Adjusted EBITDA projection, seeing as it has focused greatly on reducing its operating loss. I also agree with Grab’s revenue projection. Some investors may believe that since Grab’s market share is quite large, it may not be able to meet this revenue growth target. However, I believe that Grab will be able to hit this target due to the rise of the tourism industry in Singapore. I will discuss both Grab’s market share and Singapore’s tourism industry in more detail below.</p><h2 id=\"id_1689595475\">Reasons to Buy:</h2><h3 id=\"id_3973139139\">Strong Brand Image:</h3><p>Grab has extremely strong and positive name recognition in Southeast Asia. This is due to its wide and popular suite of services, as well as its commitment to uplifting the economies of the nations it operates in. CEO Anthony Tan’s “Grab for Good” initiative drives “digital literacy, economic inclusion, and the development of technology skills across Southeast Asia.&#34; Additionally, Grab has set a goal for carbon neutrality by 2040. These commitments have given Grab a positive brand image in the region.</p><h3 id=\"id_2974696049\">Market Share:</h3><p>Grab is the dominant player in the Southeast Asian food delivery industry, with 55% of market share in Vietnam and Malaysia as of 2023. Additionally, Grab holds 70% of the ride-hailing industry in Southeast Asia. Some might argue that, because of its dominance, the company does not have more room to grow; I disagree.</p><h3 id=\"id_2732796926\">Growth Potential:</h3><p>Despite its strength and market share in the Southeast Asian market, Grab still has room for growth by capitalizing on Southeast Asia’s growing tourism industry. As mentioned previously, Grab has shown an increase of 19% in MTUs YoY. Additionally, Grab anticipates a 69% increase in travel MTUs YoY.</p><p>As the largest force in the Southeast Asian ride-hailing industry, Grab is poised to benefit from the post-pandemic rebound of Singapore’s tourism industry. Between January and October 2023, Singapore had 11.3 international tourists. This number is 4 million short of pre-pandemic levels. Singapore has made a large effort to bolster their tourism industry; most notably, they announced the “Made in Singapore” global campaign in September 2023. This campaign will include “in-market activations, industry partnerships, collaborations with content creators, as well as familiarisation trips to immerse media and influencers in Made in Singapore experiences.” Clearly, Singapore is investing in the future of their tourism industry.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/ee7387d0b4198e6dbd4410c4daf4e89a\" tg-width=\"927\" tg-height=\"199\"/></p><p>Note that 2023 data is for months Jan-Oct. (Department of Singapore Statistics)</p><p>Grab sees these travelers as a strong seasonal opportunity to grow. Grab believes that “tourists can spend twice more on ride-hailing services per day compared to regular users.” The company has made strides to capitalize on the influx of tourists in the region.</p><p>Grab has implemented a traveler’s page on their app and have partnered with WeChat and Uber to promote Grab to travelers using those apps. The Uber app automatically redirects to Grab’s app when the user is in Southeast Asia. Additionally, the company has ensured that they have a strong supply of driver-partners around airports to capture incoming travelers. The implementation of these features shows that Grab recognizes the strength of the tourism industry in Southeast Asia. As the strongest brand name in the region – with connections to other strong brand names such as Uber and WeChat – Grab will certainly grow as tourism rises. This growth will result in long-lasting profitability in the future.</p><p>While Grab holds the majority of the market share in the food delivery business, it has several competitors. Chief competitors include Delivery Hero’s (DHERO) Foodpanda, as well as GoFood and ShopeeFood. While this business remains unprofitable, Grab has continued to grow, whereas its chief competitor – Foodpanda – lost 5% growth YoY this quarter. This indicates that Grab is still taking market share in its Deliveries business. Delivery Hero recently closed negotiations for selling Foodpanda’s Southeast Asia because they couldn’t agree to terms. The fact that Delivery Hero was looking to get Foodpanda out of Southeast Asia shows that they are not optimistic about their operations in the region.</p><p>Grab’s Financial Services business still has vast growth opportunities. GrabFin’s benefit is that it can be linked to any credit or debit card, allowing it to be used across a wide range of countries. This gives it an edge over the other digital payment apps in the region. The other major players in this industry are Sea Limited’s (SE) SeaMoney and GoTo. SeaMoney is especially strong, as it is not a superapp that is spending large amounts of cash on growth like Grab is. Regardless, GrabFin is performing strongly. This is clear through their 53% revenue growth YoY. Comparatively, SeaMoney experienced 21% revenue growth. GrabFin’s outsized growth indicates that the large investments Grab is making into the business are paying off. I will be watching the future growth figures from GrabFin to determine the strength of this business segment as it matures.</p><h3 id=\"id_1650702051\">Strong Leadership &amp; Positive Sentiment from Investors:</h3><p>Uber (UBER) CEO Dara Khosrowshahi, who has led the company since 2017, is on Grab’s board of directors. He bargained for a board seat and 27.5% equity in the company as a part of Grab’s Uber Southeast Asia acquisition. As of now, they own 14%. Khosrowshahi has led Uber through its IPO and made it into the dominant force it is today, trading at a EV/EBITDA multiple of 46. Competent and experienced leadership like Dara Khosrowshahi and the previously mentioned CEO Anthony Tan inspire my confidence in the company’s management.</p><p>Roughly a quarter of Grab is held by private investors. About 55% of the company’s stock is owned by institutional investors, including Morgan Stanley and BlackRock. Grab initiated a $500 million share repurchase program at the end of 2023. As of 2024Q1, they have reported $94 million in buybacks so far. The leadership’s buyback program and the backing of institutional investors indicates healthy financials. Having a buyback program this early on in Grab’s lifetime also indicates that the company’s leadership is confident about Grab’s future. Such shareholder-friendly activities are another reason why I believe Grab is a strong investment.</p><h3 id=\"id_555286979\">Increasing Cost-Efficiencies:</h3><p>Grab has focused largely on reducing costs to increase profitability as it becomes a more mature company. According to the latest investor presentation, Grab has decreased its headcount costs by 20% and reduced its financial segment’s cost base by 15% over the past year. Additionally, Tan vaguely indicated that AI is being employed to create cost reductions. In the latest earnings call, he stated that AI is “one of the key reasons why we are confident about how we can continuously optimize cost levels in our regional corporate costs.” This statement followed Grab’s announcement of a partnership with OpenAI on May 30, 2024 to improve Grab’s accessibility, customer support, and mapping using AI. I believe the stronger product and leaner business model that this partnership brings will allow for increased profitability.</p><h3 id=\"id_2855746001\">Cheaper Than Ever:</h3><p>Despite Grab’s impressive growth and buybacks, the slightly-below expected 2024 revenue projection from the Mobility business, combined with a decrease in net income, caused an 8% decline in Grab’s share price. But, as long as Grab continues to grow through its traveler business and its operations become more cost-efficient, Grab should rise above its currently cheap valuation.</p><h2 id=\"id_2746868304\">Intrinsic Valuation:</h2><p>I used a 5-year DCF model to determine Grab’s fair value. I used a DCF to focus on the key projections of revenue, SG&amp;A costs, and taxes – all of which are pivotal in the assessment of this company.</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/ab87fb8fb2978ff53b67284121678859\" tg-width=\"694\" tg-height=\"367\"/></p><p>My model</p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/4d3d7f1aa054fa865fa3e4013fbca291\" tg-width=\"640\" tg-height=\"259\"/></p><p>My model</p><h3 id=\"id_1094011025\">Projections and Assumptions:</h3><p>This model uses the following assumptions:</p><ul style=\"\"><li><p>Revenue will continue to grow at Grab’s 2024 projection of 18% per year for the next five years. I believe that with the incoming growth in traveler MTUs and the financial services segment, Grab will be able to maintain this growth for the next five years. This projection is subject to change depending on Grab’s performance in future quarters.</p></li><li><p>Grab’s tax rate will be low for the next few years as it ramps up to Singapore’s average of 17%. This is because Grab has been unprofitable until recently, and as such can make use of deferred tax assets.</p></li><li><p>SG&amp;A will continue to fall proportionally to revenue as Grab continues to optimize its operations. Uber’s SG&amp;A was roughly 19% of its revenue in 2023. I have projected Grab’s to reach 30% at the end of the five-year projected period. I believe they will have more SG&amp;A costs than Uber because they have to manage growing their international operations, whereas Uber’s is largely in the US and Canada.</p></li><li><p>I project a perpetuity growth rate of 3%, which is in line with GDP growth. The reason why I used the perpetual growth rate method as opposed to a multiple is because Grab and many of its peers are currently unprofitable. This makes choosing a multiple especially tricky. Additionally, as Grab’s financial services segment grows, it becomes less comparable to other ride-hailing and delivery companies.</p></li></ul><h3 id=\"id_1871568665\">Fair Value:</h3><p>This model puts Grab’s fair value at $4.56, which is an upside of 28.93% as of June 20th, 2024.</p><h2 id=\"id_2603178858\">Risk: Cyclical Headwinds</h2><p>Seeing as all three of Grab’s businesses are consumer-facing, Grab’s revenue is heavily dependent on economic conditions. That being said, Grab’s recent 19% MTU growth in their Deliveries and Mobility segments and projected 69% growth in traveler MTUs YoY shows that they are still growing healthily and will continue to do so. The seasonal headwinds of rising tourism in the summer months will also promote growth. With its strong brand name and continued growth potential, the possibility of cyclical headwinds should not scare investors away.</p><h2 id=\"id_1736854309\">Conclusion:</h2><p>After trading sideways for the past two years, Grab’s future growth and cost-efficiency will finally make it a profitable company in the long term. Its hold over Southeast Asia and strong partnerships with other brands will be valuable assets as it looks to benefit from the rising tourism industry. Over the next few quarters, if the growth metrics continue to impress and profitability improves, Grab will prove to be a strong investment. The key metrics that I will be watching over the next few quarters to determine if Grab is on track are its MTU growth and gross merchandise value (GMV) growth.</p></body></html>","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Grab: Reducing Costs And Growing Through Tourism</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nGrab: Reducing Costs And Growing Through Tourism\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-06-24 14:34 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4700126-grab-reducing-costs-and-growing-through-tourism><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Grab offers deliveries, mobility, and financial services in Southeast Asia, with a stock price down 70% since its IPO in 2021.Grab has a dominant market share and a strong brand name. The company will...</p>\n\n<a href=\"https://seekingalpha.com/article/4700126-grab-reducing-costs-and-growing-through-tourism\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"GRAB":"Grab Holdings"},"source_url":"https://seekingalpha.com/article/4700126-grab-reducing-costs-and-growing-through-tourism","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"2444212056","content_text":"Grab offers deliveries, mobility, and financial services in Southeast Asia, with a stock price down 70% since its IPO in 2021.Grab has a dominant market share and a strong brand name. The company will continue to grow due to its newer financial services segment and the rise of tourism in Singapore.Despite initial losses, Grab's increasing cost-efficiency and profitability, along with growth in customer base, make it a buy.Investment Thesis:Grab is a Singapore-based superapp that offers deliveries, mobility, and digital financial services for individuals and institutions across eight countries within Southeast Asia; namely, Singapore, Cambodia, Indonesia, Malaysia, Myanmar, the Philippines, Thailand, and Vietnam.Its stock price is down roughly 70% since its IPO in 2021 because, much like many other superapps, it has been operating at a loss for multiple years. Its first profitable quarter was 2023Q4, which was followed by another unprofitable quarter.Despite short-term profitability issues, I believe the company’s increasing cost-efficiency and profitability, paired with its continuing growth in customer base, make it a buy.Three Business Segments:Mobility: As Grab’s oldest business, Grab’s ride-hailing segment has been quite dominant. In 2018, Grab acquired Uber Southeast Asia to expand their delivery and transportation businesses.Deliveries: Grab’s suite of delivery services were launched in 2015. After acquiring Malaysian supermarket chain Jaya Grocer, Grab’s grocery delivery business – GrabMart – grew substantially. Grab’s delivery and mobility businesses account for 89% of its revenue.Financial Services: Launched in 2017, Grab’s financial services segment is the newest and smallest of Grab’s businesses. In 2021, Grab bought a 90% stake in Indonesian mobile wallet company OVO. GrabPay offers lending, “buy now, pay later,” and insurance services.2024 First Quarter Report:Grab’s 2024Q1 report showed a decrease in operating loss from $125 million to $75 million, as well as a $129 million rise in adjusted EBITDA. Despite the seasonal challenges of Chinese New Year festivities and Ramadan, Grab’s Mobility and Deliveries businesses showed a 19% increase in monthly transacting users (MTUs) year-over-year.Grab 2024Q1 Investor PresentationAdditionally, Grab’s financial services segment saw a 64% increase in total loans disbursed YoY.Grab 2024Q1 Investor Presentation2024 Adjusted EBITDA guidance was raised from $180-200 million to $250-270 million. Revenue guidance was, on the other hand, held static at 18%. I believe Grab will meet its Adjusted EBITDA projection, seeing as it has focused greatly on reducing its operating loss. I also agree with Grab’s revenue projection. Some investors may believe that since Grab’s market share is quite large, it may not be able to meet this revenue growth target. However, I believe that Grab will be able to hit this target due to the rise of the tourism industry in Singapore. I will discuss both Grab’s market share and Singapore’s tourism industry in more detail below.Reasons to Buy:Strong Brand Image:Grab has extremely strong and positive name recognition in Southeast Asia. This is due to its wide and popular suite of services, as well as its commitment to uplifting the economies of the nations it operates in. CEO Anthony Tan’s “Grab for Good” initiative drives “digital literacy, economic inclusion, and the development of technology skills across Southeast Asia.\" Additionally, Grab has set a goal for carbon neutrality by 2040. These commitments have given Grab a positive brand image in the region.Market Share:Grab is the dominant player in the Southeast Asian food delivery industry, with 55% of market share in Vietnam and Malaysia as of 2023. Additionally, Grab holds 70% of the ride-hailing industry in Southeast Asia. Some might argue that, because of its dominance, the company does not have more room to grow; I disagree.Growth Potential:Despite its strength and market share in the Southeast Asian market, Grab still has room for growth by capitalizing on Southeast Asia’s growing tourism industry. As mentioned previously, Grab has shown an increase of 19% in MTUs YoY. Additionally, Grab anticipates a 69% increase in travel MTUs YoY.As the largest force in the Southeast Asian ride-hailing industry, Grab is poised to benefit from the post-pandemic rebound of Singapore’s tourism industry. Between January and October 2023, Singapore had 11.3 international tourists. This number is 4 million short of pre-pandemic levels. Singapore has made a large effort to bolster their tourism industry; most notably, they announced the “Made in Singapore” global campaign in September 2023. This campaign will include “in-market activations, industry partnerships, collaborations with content creators, as well as familiarisation trips to immerse media and influencers in Made in Singapore experiences.” Clearly, Singapore is investing in the future of their tourism industry.Note that 2023 data is for months Jan-Oct. (Department of Singapore Statistics)Grab sees these travelers as a strong seasonal opportunity to grow. Grab believes that “tourists can spend twice more on ride-hailing services per day compared to regular users.” The company has made strides to capitalize on the influx of tourists in the region.Grab has implemented a traveler’s page on their app and have partnered with WeChat and Uber to promote Grab to travelers using those apps. The Uber app automatically redirects to Grab’s app when the user is in Southeast Asia. Additionally, the company has ensured that they have a strong supply of driver-partners around airports to capture incoming travelers. The implementation of these features shows that Grab recognizes the strength of the tourism industry in Southeast Asia. As the strongest brand name in the region – with connections to other strong brand names such as Uber and WeChat – Grab will certainly grow as tourism rises. This growth will result in long-lasting profitability in the future.While Grab holds the majority of the market share in the food delivery business, it has several competitors. Chief competitors include Delivery Hero’s (DHERO) Foodpanda, as well as GoFood and ShopeeFood. While this business remains unprofitable, Grab has continued to grow, whereas its chief competitor – Foodpanda – lost 5% growth YoY this quarter. This indicates that Grab is still taking market share in its Deliveries business. Delivery Hero recently closed negotiations for selling Foodpanda’s Southeast Asia because they couldn’t agree to terms. The fact that Delivery Hero was looking to get Foodpanda out of Southeast Asia shows that they are not optimistic about their operations in the region.Grab’s Financial Services business still has vast growth opportunities. GrabFin’s benefit is that it can be linked to any credit or debit card, allowing it to be used across a wide range of countries. This gives it an edge over the other digital payment apps in the region. The other major players in this industry are Sea Limited’s (SE) SeaMoney and GoTo. SeaMoney is especially strong, as it is not a superapp that is spending large amounts of cash on growth like Grab is. Regardless, GrabFin is performing strongly. This is clear through their 53% revenue growth YoY. Comparatively, SeaMoney experienced 21% revenue growth. GrabFin’s outsized growth indicates that the large investments Grab is making into the business are paying off. I will be watching the future growth figures from GrabFin to determine the strength of this business segment as it matures.Strong Leadership & Positive Sentiment from Investors:Uber (UBER) CEO Dara Khosrowshahi, who has led the company since 2017, is on Grab’s board of directors. He bargained for a board seat and 27.5% equity in the company as a part of Grab’s Uber Southeast Asia acquisition. As of now, they own 14%. Khosrowshahi has led Uber through its IPO and made it into the dominant force it is today, trading at a EV/EBITDA multiple of 46. Competent and experienced leadership like Dara Khosrowshahi and the previously mentioned CEO Anthony Tan inspire my confidence in the company’s management.Roughly a quarter of Grab is held by private investors. About 55% of the company’s stock is owned by institutional investors, including Morgan Stanley and BlackRock. Grab initiated a $500 million share repurchase program at the end of 2023. As of 2024Q1, they have reported $94 million in buybacks so far. The leadership’s buyback program and the backing of institutional investors indicates healthy financials. Having a buyback program this early on in Grab’s lifetime also indicates that the company’s leadership is confident about Grab’s future. Such shareholder-friendly activities are another reason why I believe Grab is a strong investment.Increasing Cost-Efficiencies:Grab has focused largely on reducing costs to increase profitability as it becomes a more mature company. According to the latest investor presentation, Grab has decreased its headcount costs by 20% and reduced its financial segment’s cost base by 15% over the past year. Additionally, Tan vaguely indicated that AI is being employed to create cost reductions. In the latest earnings call, he stated that AI is “one of the key reasons why we are confident about how we can continuously optimize cost levels in our regional corporate costs.” This statement followed Grab’s announcement of a partnership with OpenAI on May 30, 2024 to improve Grab’s accessibility, customer support, and mapping using AI. I believe the stronger product and leaner business model that this partnership brings will allow for increased profitability.Cheaper Than Ever:Despite Grab’s impressive growth and buybacks, the slightly-below expected 2024 revenue projection from the Mobility business, combined with a decrease in net income, caused an 8% decline in Grab’s share price. But, as long as Grab continues to grow through its traveler business and its operations become more cost-efficient, Grab should rise above its currently cheap valuation.Intrinsic Valuation:I used a 5-year DCF model to determine Grab’s fair value. I used a DCF to focus on the key projections of revenue, SG&A costs, and taxes – all of which are pivotal in the assessment of this company.My modelMy modelProjections and Assumptions:This model uses the following assumptions:Revenue will continue to grow at Grab’s 2024 projection of 18% per year for the next five years. I believe that with the incoming growth in traveler MTUs and the financial services segment, Grab will be able to maintain this growth for the next five years. This projection is subject to change depending on Grab’s performance in future quarters.Grab’s tax rate will be low for the next few years as it ramps up to Singapore’s average of 17%. This is because Grab has been unprofitable until recently, and as such can make use of deferred tax assets.SG&A will continue to fall proportionally to revenue as Grab continues to optimize its operations. Uber’s SG&A was roughly 19% of its revenue in 2023. I have projected Grab’s to reach 30% at the end of the five-year projected period. I believe they will have more SG&A costs than Uber because they have to manage growing their international operations, whereas Uber’s is largely in the US and Canada.I project a perpetuity growth rate of 3%, which is in line with GDP growth. The reason why I used the perpetual growth rate method as opposed to a multiple is because Grab and many of its peers are currently unprofitable. This makes choosing a multiple especially tricky. Additionally, as Grab’s financial services segment grows, it becomes less comparable to other ride-hailing and delivery companies.Fair Value:This model puts Grab’s fair value at $4.56, which is an upside of 28.93% as of June 20th, 2024.Risk: Cyclical HeadwindsSeeing as all three of Grab’s businesses are consumer-facing, Grab’s revenue is heavily dependent on economic conditions. That being said, Grab’s recent 19% MTU growth in their Deliveries and Mobility segments and projected 69% growth in traveler MTUs YoY shows that they are still growing healthily and will continue to do so. The seasonal headwinds of rising tourism in the summer months will also promote growth. With its strong brand name and continued growth potential, the possibility of cyclical headwinds should not scare investors away.Conclusion:After trading sideways for the past two years, Grab’s future growth and cost-efficiency will finally make it a profitable company in the long term. Its hold over Southeast Asia and strong partnerships with other brands will be valuable assets as it looks to benefit from the rising tourism industry. Over the next few quarters, if the growth metrics continue to impress and profitability improves, Grab will prove to be a strong investment. The key metrics that I will be watching over the next few quarters to determine if Grab is on track are its MTU growth and gross merchandise value (GMV) growth.","news_type":1},"isVote":1,"tweetType":1,"viewCount":432,"commentLimit":10,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"symbols":["GRAB"],"verified":2,"subType":0,"readableState":1,"langContent":"EN","currentLanguage":"EN","warmUpFlag":false,"orderFlag":false,"shareable":true,"causeOfNotShareable":"","featuresForAnalytics":[],"commentAndTweetFlag":false,"andRepostAutoSelectedFlag":false,"upFlag":false,"length":65,"xxTargetLangEnum":"ORIG"},"commentList":[],"hasMoreComment":false,"orderType":2}