Grab’s financial arm takes center stage at its investor day

“We’re putting a stake in the ground,” said Grab CFO Peter Oey. The Southeast Asian tech company held its first investor day earlier this week, where it announced breakeven targets for its businesses – one of a number of sweets management dangled to analysts, investors, and reporters at the event. 

This comes as the super app’s share price suffers from a year-to-date decline of over 60%, and at a time when investors’ patience for unprofitable companies like Grab is very thin. Even though the company reported a “strong set of results” for the second quarter of the year, the market was unforgiving, and shares have fallen 22% since then. 

It’s hard to fight the macro tailwinds. However, by delivering on its targets, Grab’s management can build credibility with investors. But this is a double-edged sword, as it ramps up the pressure on the company. A failure to meet guidance will squander any goodwill that remains. 

Group expected to break even by 2024 

Grab announced that revenue in 2023 was expected to be 45% to 55% higher than the year before. This falls short of the 89% year-on-year growth expected in 2022. 

However, it tracks with the 2023 estimates of 49% growth expected by equity analysts. 

It also exceeds estimates for most of Grab’s peers in the region or in similar lines of business – except its archrival, Indonesia’s GoTo. The latter is expected to grow strongly because its ecommerce business, Tokopedia, has not been monetized to the same level as other players. 

As a research report from BNI Sekuritas notes, “Tokopedia’s take rate of 2.9% in Q1 2022 is much lower than peers.” 

 See also: Does GoTo deserve to trade at 6x Grab’s valuation?

Grab also announced adjusted EBITDA breakeven targets for most of its business units. 

Notably, it expects the group as a whole to break even by the second half of 2024, or around two years from now. 

The only exception, however, is GrabFin – no guidance was provided for when Grab’s financial arm is expected to break even, which might lead to some nervousness considering the current size of its negative margin. The company says that GrabFin creates a lot of value for the network as a whole, but such intangible benefits don’t show up in financial statements. 

Investors should welcome the clarity on the breakeven timelines regardless. 

However, EBITDA does not have the same value as free cash flows, which is ultimately what investors want to see, as Uber CEO Dara Khosrowshahi highlighted to his team earlier this year. 

Financial services takes the limelight 

Asset-light the way to go?

Moving into higher-margin businesses