SINGAPORE – Grab Holdings, South-east Asia’s biggest ride-hailing and food delivery firm, on Thursday forecast upbeat 2023 revenue and pulled forward its profitability timeline, betting on strong demand for its services and as cost cuts pay off.
Shares of the company, however, fell 8.3 per cent to US$3.21 in New York on fears of a slower recovery as Grab projected a return to pre-pandemic levels in its ride-share business only by the end of the year.
Some analysts also said the quickened profitability target suggests that Grab may sacrifice top-line expansion.
Evercore ISI analyst Mark Mahaney wrote that Grab’s focus on profitability indicates a “meaningful” deceleration in segment gross merchandise value growth from more than 20 per cent to single digits.
“This will be the metric to keep a close eye on in the coming quarters,” he said. “That said, we are encouraged by Grab’s consistent push towards profitability.”
Demand for delivery services has slowed since the height of the Covid-19 pandemic, but with offices reopening, more people are booking rides through Grab, a household name in eight South-east Asian countries.
Grab said it expects to reach positive adjusted earnings before interest, taxes, depreciation and amortisation (Ebitda) in the final quarter of 2023. It previously expected to hit that goal in the second half of 2024.
Adjusted Ebitda loss for the fourth quarter narrowed to US$111 million (S$149 million), down from a negative US$305 million a year ago.
It was also better than the US$147 million loss that analysts estimated. Revenue quadrupled to US$502 million, also beating predictions.
For 2023, Grab forecast an Ebitda loss of between US$275 million and US$325 million, smaller than its 2022 loss of US$793 million and better than analysts had estimated.
Grab chief executive Anthony Tan assured investors that its ride-share business would be helped by economies reopening, tourism recovering and expansion into more cities.
“There is growing consumption in the (South-east Asia) region, a population that craves on-demand digital services,” he said.
Singapore-based Grab is among money-losing South-east Asian Internet giants that have shifted strategies to focus on achieving profitability instead of spending on growth.
The company, which has spent heavily on incentives and promotions to gain traction among customers, is scaling back on those expenses and taking other measures to cut costs.
Rival GoTo Group said last week it is bringing forward its profitability targets by a year, while Sea Limited has cut jobs and closed down its e-commerce operations in India, Europe and some Latin American markets to trim costs.
While its competitors cut thousands of jobs last year, Grab has refrained from mass layoffs even after its shares slumped following its stock market debut in the United States more than a year ago.
Bloomberg Intelligence analyst Nathan Naidu said: “As its foothold across markets strengthens and unit economics improve with greater size, Grab should be able to spend less on user acquisitions, putting it on track to turn a profit even as it invests in expansion.”
But Grab is still far off from profitability on a net income basis. In the fourth quarter, its quarterly net loss narrowed to US$386 million from US$1.06 billion a year earlier, and its cash and cash equivalents shrank to US$1.8 billion from US$4.8 billion a year ago.
“It is solid overall, but losing money is a problem... this is not the market environment for businesses losing money,” said Mr Thomas Hayes, chairman at Great Hill Capital in New York.
BLOOMBERG, REUTERS
