Grab ‘sink’ in losses

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2021-04-18 19:05:22

On CNBC’s Squawk Box Asia program on April 14, senior researcher Tom White from DA Davidson said that it is clear that investors are increasingly interested in the roadmap leading to profits. However, there has been a shift in investor sentiment, from focusing solely on growth and increasing market share to a more balanced approach.

“While still focusing on the break-even point, investors are more likely to give Grab more time to invest in new product portfolios,” said Tom White.

Earlier, on April 13, Grab announced to issue shares in the US in the next few months through a merger with Altimeter Growth. The deal could raise Grab’s valuation to $ 39.6 billion. This is the world’s largest short-check merger, formed to raise money to buy private companies.

Grab is expected to lose $ 600 million this year. Photo: Bloomberg

Overall, Grab is still not profitable. In 2020, Grab has a loss of $ 800 million based on EBITDA (profit before tax, interest and depreciation) and is expected to lose $ 600 million this year. EBITDA is considered a measure of the financial health of a business.

Grab said that EBITDA for the transport division has been positive since the fourth quarter of 2019. Adjusted net sales in 2020 reach $ 1.6 billion and are expected to increase to $ 4.5 billion by 2023. Grab estimates it could generate $ 500 million EBITDA in two years.

“If you look at the two core businesses, Grab is doing quite well. All of their markets in the ride-hailing sector are at least profitable in terms of EBITDA, so are 5 out of 6 food delivery markets.” , Said Tom White.

White thinks Grab will be given more time to invest in new types of additions, new categories, new products, considering what it can do in the two traditional categories.

Meanwhile, Sachin Mittal – Vice Chairman of DBS Bank said losses occurred when trying to capture market share, especially in the current environment when cheap capital is available and helping the company to build scale, reduce spending. fee.

“So you have to be the market leader, build scale, reduce costs, and in the end, when the money isn’t cheap anymore, it’s time you can make an instant profit because you already have some scale, “said Sachin Mittal.

Investors may be attracted because Grab dominates areas like food delivery, Mittal added. Investing in Grab shares also gives them access to the Southeast Asian fintech market.

One of Grab’s core segments is financial services, including e-payments, lending, insurance, digital banking, and asset management. This unicorn has yet to prove its leading role in fintech, which will be a high growth segment and “burn money” in the short term. Therefore, the capital that Grab raised at the IPO can be used to deploy fintech.

In the merger with Altimeter Growth, Grab will receive $ 4.5 billion in cash, including $ 4 billion in private investment in public equity (PIPE) from BlackRock, Fidelity, T. Rowe Price, Counterpoint funds Global and Temasek.

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