If you think SEA Ltd’s results were discouraging and its guidance disappointing, Grab had a worse day seeing its share price tanked 37% after releasing its 4Q results.
Some investors would have thought that $5 is the bottom for Grab’s share price, and price decline should be minimal should there be any. Little did investors expect the price to plunge to $3.28 in a day.
Are the results that bad?
Let’s look at some of the numbers.
Grab (NASDAQ:GRAB) measures the Gross Merchandise Value (GMV) and this is useful to show its market share vis-a-vis the competitors. GMV is basically the total spending on the platform.
For example, you paid $10 on GrabFood, most of it goes to the food vendor while Grab gets 18.2% of it, or $1.82. And this $1.82 will be shared with the driver and to pay for other costs. GMV would account for the $10 but Grab’s revenue is much lower than that.
In 4Q2021, GMV changes across segments were as follows:
- Deliveries: +52%
- Mobility: -11%
- Financial Services: +29%
Deliveries segment definitely shone while Mobility was disappointing.
Considering that 2021 was expected to be a year of recovery, seeing ride-hailing report worse business than in 2020 at -14% was disappointing. However, we saw the same situation for SBS rail, 4Q2021 ridership was lower than in 4Q2020. This coincided with the Sep-Oct 2021 period where Covid cases were spiking in Singapore. Hence, more people were staying at home, boon for Deliveries and bane for Mobility. Grab results were consistent with the Covid situation.
Some credit should be given. Grab still managed to grow 29% overall as Deliveries and Financial Services more than cover the decline in Mobility. Grab has found a way to make money whether people are at home or travelling.
The most disappointing part was Grab’s revenue. It declined 44% in 4Q2021. This was due to the jump in incentives given to partners (+74%) and consumers (+126%). Such numbers easily outpace the growth in GMV and leaving Grab with a lower revenue.
Grab enlarged its losses at $1.1b, almost double the loss in 4Q2020. It is evident that Grab is still aggressively spending to capture market share. Giving incentives would promote usage and drive GMV growth. Staff strength and operating cost went up too to handle larger volume and the digital bank still suck capital before it starts making decent revenue.
Lastly, Grab’s outlook for 1Q2022 is bleak.
Grab expects Deliveries GMV to be around $2.5b, a 47% growth. Mobility GMV at $800m, a decline of 1%. Financial Services GMV at $3.2b, a 17% growth. There is some slight deceleration of growth.
Overall, Mobility is stabilised, Deliveries is in a good stage of growth and financial services still have a lot of room to work on. Yet, Mobility and Deliveries are far from profitability and Grab is going to burn more money fighting the financial institutions next. The problem of being a superapp is that you have many enemies to fight against at the same time.
This difficult business is still trading at PS of 15.6x and comparatively,
- Uber: PS 3.3x
- DiDi: 0.7x.
- DoorDash: 7.1x.
If we accord a PS of 5x as fair for Grab, that would mean a share price of $1.05.
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