Grab Deep Dive Part 2: +100% Potential

Financials, Opportunities, Valuation

Hi fellow investors 👋

Here’s Part 1 of my Grab Deep Dive 👇

This "Superapp" Trades At 28% Cash In An Emerging Market

---

Company: Grab Holdings

Ticker: GRAB

Stock Price Today: $4.90

Stock Price High: $13.90

Market Cap: $19.73B

Headquarters: Singapore

---

Outline

1. Introduction (Part 1)

2. Southeast Asia (Part 1)

3. Business Overview (Part 1)

4. Competitive Advantage (Part 1)

5. Risks (Part 1)

6. Financials (Part 2)

7. Opportunities (Part 2)

8. Valuation (Part 2)

---

Grab Financials

Here’s a rundown of the financials and YoY/QoQ growth for GRAB:

• Revenue grew 17% YoY compared to Q4 23 and 18.6% YoY compared to FY23. This compares to 30.1% and 64.6% growth last year. Beat estimates ✅

• Gross Merchandise Value up 20% YoY. Missed estimates. ❌

• $97 million adj. EBITDA which was a 12.7% increase YoY. Met estimates. ✅

• Missed on revenue guidance and missed on EBITDA guidance. This was a result of financial services unprofitability, increased incentive spending, and increased competition. ❌

• Overall, a $11 million profit in the quarter makes this the 2nd profitable quarter in a row but FY24 was still an unprofitable year.

GRAB Deliveries

GRAB’s biggest revenue earner, Deliveries, had GMV rise 19% YoY to $3.2 billion Q4, whilst revenue grew 13%. This signals a slight bit of competition in terms of turning that GMV into revenue, likely due to lower take rates and incentivizing drivers/merchants to stay on the platform with higher earnings for them.

A growing portion of this revenue (1.7%) is now advertising revenue which is growing at 60% YoY. I’ll discuss the opportunities for GRAB here in the opportunities section.

Adjusted EBITDA for Delivery came in weak compared to Q4 2023 at 1% growth but FY24 growth was 140%. This shows the volatility QoQ, but also is evidencing new product releases which require lower initial costs to customers and more incentives, hence reducing margins. Not a bad thing in the long run at all…and the 140% YoY growth shows there’s currently not any worry here. This is definitely something to watch though to make sure management can increase take rates again when they choose the time is right.

Grab Mobility

Mobility grew slightly quicker than Delivery which was as expected due to the smaller volume, and natural flywheel effects from the Delivery platform. GMV rose 23% YoY and revenue grew 19% YoY, as did EBITDA.

Not too many worries here to be honest. Driver supply increased, hence demand remained fairly high. The only negative I want to comment on is a slight contraction in EBITDA as a % of GMV which was at 8.4% compared to 8.7% in Q4 2023. This no doubt does signal competitive pressures and management feeling the need to reduce take rates slightly. The fact that driver supply has now surpassed pre-COVID levels is promising but it’s a very fine line between increasing EBITDA margins, and hurting overall GMV with reduced driver supply.

Financial Services

Financial services is currently the high growth, but unprofitable segment of GRAB. Revenue grew 38% YoY, and adjusted EBITDA grew 45% but is still at -$27 million. The loan portfolio grew at 64% but this high growth is currently being managed by ECL’s through the PnL, hence the unprofitability. Guidance suggests 2H 2026 should be the inflection point for financial services.

Balance Sheet📊

The GRAB balance sheet is pristine. They have lots of cash & cash equivalents, an immaterial amount of debt in relative terms, and they’re managing the credit portfolio very nicely so far. One of the better balance sheets I’ve seen around.

My Take On The Financials

The results were ok, not amazing, but ok. My current biggest concern is on growth which has normalized massively after a 2022 and 2023 boom. I’ll get into all this in the valuation section, but people need to realize GRAB isn’t a high growth company like many people think it is.

They’re not disrupting. They have a finite TAM. All they’re doing is currently winning in a competitive market. Analyst estimates for growth are currently 21% in 2025, and 15% in 2026 which seems reasonable, if not optimistic, given the 19% revenue growth in 2024.

The more promising part is the consistent margin expansion we are seeing. I’m personally not too worried if a company is profitable or not, as long as margins are heading in the right direction. What I will say is that GRAB is one of the few companies where I’m ok with slower revenue growth of 19% YoY and unprofitability. Normally, if a company is unprofitable I’d like to see much more revenue growth but GRAB is an exception because of the emerging market opportunity, and the competitive advantage that I see.

Looking at the fundamentals alone, I will say I don’t think there’s a load to scream about with GRAB. They’re good results. They have a nice balance sheet. They’re growing margins slowly and growth is moderate.

---

Opportunities

Many companies have the luxury of geographic expansion as a big growth lever, but GRAB doesn’t have this and I don’t believe it ever will. What they do just won’t be good enough to take over from current leaders in other geographies, so GRAB’s opportunities ahead are all about winning more of the SEA population, becoming far more tech savvy, and expanding product lines.

I’ll talk all about this in this section👇

Southeast Asia Expansion

The core segments of Grab (delivery and mobility) showed some nice growth at 19% YoY and 23% respectively, but the opportunity here is still substantial as only one in 20 Southeast Asians are monthly transacting users (MTUs). We’ve got to take this number with a pinch of salt because the one in 20 Southeast Asian’s includes young children and the elderly. As per my research, 67% of the SEA population is aged between 15-64 which equates to ~470 million people. You could argue this range is still even a bit wide considering the amount of 15 year old transacting on the platform could be quite low, so I’d estimate there to be around 420 million people for GRAB to try win.

Considering they’ve currently got 44 million MTUs, this means I’d estimate GRAB to have won ~10.5% of the population in SEA they should be targeting which still shows the growth ahead.

If we just run the numbers quickly (not being too accurate)…if GRAB can get to 25% of the SEA population by 2030 that could equate to 183.75 MTUs based on 1.2% SEA population growth. At a current monthly ARPAC of ~$5.79, you’ve then got $1.06B in revenue per month which translates to $12,766B per year (or 36.6% CAGR).

This probably isn’t realistic, and management by no way have suggested these kind of numbers are possible, but it shows the opportunity ahead, and that was assuming GRAB won just 25% of the possible TAM and no ARPAC increase.

I think this shows that for now increasing the number of MTU’s is still the key driver for growth. We’re seeing that number increase in the 20% range, whilst order frequency increases at just 5%. A big challenge for management is getting the right balance between affordable products (which drives MTUs) and higher long term value users. Quite naturally over time the GRAB ecosystem will take over and cross-selling and ARPAC will increase considerably from what it is today. Management could quite easily sacrifice margins in exchange for increasing MTU’s and getting consumers on the platform but this:

1. Isn’t sustainable growth

2. Is not beneficial for GRAB merchants and drivers who’s earnings would be slashed.

I don’t think GRAB need to force anything different with their MTU growth. This will naturally happen over time with urbanization, digitalization, and increased supply of merchants and drivers which will make the platform even more attractive. The benefit here though is that because GRAB are in such a strong financial position, they can decide to increase incentives or lower prices depending on short term swings in the market to defend themselves against competition.

The big opportunity for GRAB lies in winning customers in rural areas which is currently ~50% of Southeast Asia. UBER are striving for the same goals at the moment in the US but the issues are as simple as:

1. Building out supply in those areas.

2. Managing prices in those areas better since generally those living in rural areas of SEA may not be as wealthy as those in urbanized areas.

GrabMaps