GRAB

[cyclone]

Grab Starts Trading Tomorrow On Nasdaq As Altimeter Shareholders Approve SPAC Deal

Jonathan Burgos
Dec 1, 2021, 03:05am EST

Grab Holdings will start trading on the Nasdaq tomorrow after Altimeter Growth Corp.’s shareholders approved the merger with Southeast Asia’s superapp giant, completing one of the world’s biggest transactions involving a special purpose acquisition company, or SPAC.

The deal, which values Singapore-based Grab at $40 billion, was approved by Altimeter’s shareholders on Tuesday and will close today subject to the satisfaction or waiver of customary closing conditions, Altimeter said in a statement. Grab has previously said it will raise $4.5 billion from the listing.

The fresh funding will come handy as Grab competes with Indonesian tech giant GoTo and Shopee owner Sea Group for dominance in Southeast Asia’s booming digital economies. Cofounded in 2012 by Anthony Tan and Tan Hooi Ling as a taxi-booking app, Grab has since grown to become a superapp by expanding its business to ride-hailing, food deliveries and digital financial services. It serves customers in more than 400 cities across Cambodia, Indonesia, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.

Fintech is particularly important for Grab, which will launch a digital bank in Singapore next year in partnership with telecommunications giant Singtel. In 2017, the superapp launched GrabPay, offering loans, insurance, wealth management and digital payments. “Millions of consumers, when thinking about GrabPay, they think I can pay now, I can pay later, I can pay anywhere,” Anthony Tan said in an interview published by Forbes Asia last month. 

Southeast Asia is among the fastest growing regions in the world, with gross merchandise value from the digital economy climbing 49% to $174 billion this year from the previous, according to a new study jointly published by Google, Temasek and Bain & Company in November. As consumers across the region increasingly embrace e-commerce and other digital platforms, the study predicts Southeast Asia’s GMV to grow to $363 billion by 2025 and surpass $1 trillion by 2030.

With the huge potential of Southeast Asia’s digital economy, Nirgunan Tiruchelvam, Singapore-based head of consumer equity research at Tellimer, recently raised his target price for Altimeter to $20 apiece from $16.50 ahead of the Grab listing. The stock closed up 1% at $12.72 on Tuesday.

More details in https://www.forbes.com/sites/jonathanbur...282d3fba1b

[CY09]

Surprised no one has commented on Grab yet. Its interesting to see how Grab will evolve. Essentially the company is taking a winner-take-all method to dominate the ride hailing and food delivery markets. With that grab can then advocate it financial arm and grabpay so that it is adopted widespread.

However, one difficulty it is facing is that Sea Group, Delivery Hero (Food panda), comfortdelgro are blocking each of their dreams to be the dominant force in SEA.

What are your opinion on it and has anyone been able to estimate the true value of Grab given that it is now listed?

[Wildreamz]

I am not optimistic. Every part of their business is challenged. Their most promising business that I'm aware of, Grab Pay (ie Mobile Wallet), is losing out to ShopeePay even though the latter is launched later.

Ride-hailing is an inherently poor business (zero/small differentiation between platforms; poor value-add by most platforms, including Grab (ie they extract much more value than they provide, IMHO); margins are vulnerable to competition and future regulations). And that is their most profitable business arm.

Not counting them out completely, but it's a long shot as a long-term investment, for now.

Edit: Right now, at best, they seem like Uber/Lyft for countries with lower spending power. Uber and Lyft are still underwater from their IPO price.

(not vested)

[weijian]

Ride-hailing is an inherently poor business (zero/small differentiation between platforms; poor value-add by most platforms, including Grab (ie they extract much more value than they provide, IMHO); margins are vulnerable to competition and future regulations). And that is their most profitable business arm.

I would like to believe that Ride-hailing is pretty mature in a sense for now. The next evolution are robo taxis but I would think it is a tad too far for now.

From what Grab Super app is trying to do, there is a little bit of DoorDash (ghost kitchens) and Pinduoduo (Grab supermarket direct from farm to consumer) as well - in addition to all the existing well known services we already know (GrabPay/ GrabMart/ delivery/BNPL stuff). This is probably where the "1+1 is not equal to 2" magic that Grab supporters/owners alike would hope it will be able to generate.

Unfortunately, there is severe (and more importantly, well funded) competition in each of these segments.

But then again, I suspect each of these businesses can't be analyzed separately (some of them are loss leaders by design and may be used as a customer acquisition tool) but needs to be combined together as a whole. And when it is combined, it is not very clear where the golden goose is hiding (for now). Then again, if everything is so clear, then it wouldn't be equity investing.

[CY09]

Truth be told, ride hailing can be a profitable business. Taxi companies have reached that as they have a call to hire system. It just that Uber/lyft/grab//gojek entered the scene and raise capital to continue their cash burning ways.

Once equity raising becomes an expensive exercise where capitalist demand a higher IRR, i think grab etc will be forced to raise prices until this business segment is profitable. Once their prices matches up to the traditional taxi businesses, they will have slightly positive net profits. However, consumers are going to suffer a very big shock in inflation.

[CY09]

Ride-hailing is an inherently poor business (zero/small differentiation between platforms; poor value-add by most platforms, including Grab (ie they extract much more value than they provide, IMHO); margins are vulnerable to competition and future regulations). And that is their most profitable business arm.

I would like to believe that Ride-hailing is pretty mature in a sense for now. The next evolution are robo taxis but I would think it is a tad too far for now.

From what Grab Super app is trying to do, there is a little bit of DoorDash (ghost kitchens) and Pinduoduo (Grab supermarket direct from farm to consumer) as well - in addition to all the existing well known services we already know (GrabPay/ GrabMart/ delivery/BNPL stuff). This is probably where the "1+1 is not equal to 2" magic that Grab supporters/owners alike would hope it will be able to generate.

Unfortunately, there is severe (and more importantly, well funded) competition in each of these segments.

But then again, I suspect each of these businesses can't be analyzed separately (some of them are loss leaders by design and may be used as a customer acquisition tool) but needs to be combined together as a whole. And when it is combined, it is not very clear where the golden goose is hiding (for now). Then again, if everything is so clear, then it wouldn't be equity investing.

Thats what grab and sea group are doing. One uses ride hailing/food delivery, the other uses e commerce to gain wide spread adoption. Hoping that consumers will use grabpay or shopeepay for their purchases. 

Grab is leading in that they have a debit card now for consumers to make transaction while shopee has not reached that stage. However as both are encroaching into the same turf (Financial and Payment services), they are burning cash to fight each other. Both companies had raised capital recently to engage in this battle - Grab from temasek and others, while shopee from the US market. I am interested to see who can last longer with their 6 billion in cash reserves. The winner will be able to take a large slice of the south east asia payment services and profit. The loser of this battle will likely result in the whole company becoming a less than 1 billion market cap in USA

[Wildreamz]

Moat
None that I can see. Nothing stopping Gojek, Sea, any other well-capitalized tech companies, Web3 version of ride-hailing to come in at any point in the future.

Even if we do not get new competitors (improbable), moving forward, squeezing restaurants and cab drivers is not the solution to their profitability problem. Regulators around the world have already been stepping in to protect the rights of gig workers: https://www.channelnewsasia.com/commenta...me-2163201

And that is before we consider the impact of raising prices to the demand for their services (I doubt it is completely inelastic).

Edit: I would like to address the point that Grab is doing a little bit of everything, hence "1+1 is not equals to 2". Usually, to be successful, you need to really excel at 1 thing first (at least 1 part of the business needs to have a defensible moat). 

For example, Google is good at search, hence, they are able to leverage their cash flow from search to finance other adjacent/synergistic projects like Maps and YouTube. When Steve Jobs returned, Apple started to make cult hit products such as iPod, which "halo effect" led to increased sales of their other products, and cash flow funded further innovative initiatives (iPhone etc): https://www.macworld.com/article/182072/ipodhalo-2.html 

Grab really has none of that. At best, their ride-hailing and IPO money give them a few more years of runway to stumble upon another hit product. But I have not seen any evidence of that thus far.

Edit 2: I would like to address that point that "ride hailing can be a profitable business. Taxi companies have reached that as they have a call to hire system"

Maybe 10 years ago when Uber/Grab Ride-hailing app is not a thing. The point is today, new entrance into this market is trivial, and to be expected moving forward.

Valuation
Grab is not cheap, trading around 30x LTM P/S and 20x NTM P/S
Their peer UBER is 4x LTM P/S and 3x NTM P/S (source: Koyfin).

Alternatives
If you like gig-economy companies, why not consider Airbnb? (much better unit economics, and global network-effects; in contrast to Grab's local network effect)
If you like ride-hailing companies, why not any of their international peers (almost everyone else is much cheaper)?
If you like mobile wallet, Fintech, digital bank companies, why not Square/Block (much cheaper, FCF positive, dominant in their market and also GAAP profitable)?
If you like South-East Asian companies, why not Sea Limited (who has been out-executing them in mobile wallet adoption, profitability (in case of their gaming division))?

In short, I will put this in the "why bother" category.

知可战与不可战者胜。-孙子

He who knows when he can fight and when he cannot will be victorious. -Sun Tzu

(vested in Airbnb and Square/Block)

[weijian]

Edit: I would like to address the point that Grab is doing a little bit of everything, hence "1+1 is not equals to 2". Usually, to be successful, you need to really excel at 1 thing first (at least 1 part of the business needs to have a defensible moat). 

For example, Google is good at search, hence, they are able to leverage their cash flow from search to finance other adjacent/synergistic projects like Maps and YouTube. When Steve Jobs returned, Apple started to make cult hit products such as iPod, which "halo effect" led to increased sales of their other products, and cash flow funded further innovative initiatives (iPhone etc): https://www.macworld.com/article/182072/ipodhalo-2.html 

Grab really has none of that. At best, their ride-hailing and IPO money give them a few more years of runway to stumble upon another hit product. But I have not seen any evidence of that thus far.

There is really no need to look so far like Google or Apple. Closer in Asia, the Chinese Super App WeChat comes to mind. WeChat did its messaging really well and the rest is history. It is the ultimate distributor of services in China.

Southeast Asia is one of the battlegrounds for the giants from US/China. In the past few years, leaders have arisen and fallen in areas like ride hailing, delivery and e-commerce. Several new business lines like fintech are also up for grabs. So yes, unfortunately recent history suggest there is no clear leader and even if one emerges, the moat isn't too durable to last more than a few years.

Nonetheless, Grab is one of the contenders for the SEA winner (if they would be one). A bet on Grab is simply a bet that believes they can out execute everyone.

Looking at all the contenders (and their deep pocketed backers), maybe the easier lesson or action is simply to figure out whom they are trying to disrupt (eg. Comfort Delgro is the best example) and then avoid investing in the disrupted.

[Wildreamz]

Hi Weijian,

Actually there is a leader right now, and it's Sea Ltd.

Their mobile wallet adoption has been way faster than Grab, in every region I searched other than Singapore, as evidenced by both Google search trends ("ShopeePay + Shopee Pay" vs "GrabPay + Grab Pay") and YouTube search trends (a good indicator of online marketing execution).

Their Digital Entertainment segment do make money, and do execute well. My only concern is that game development is not risk-free (ie moat is not the strongest). And their e-commerce, though growing topline well, does not seem to have a clear endgame, yet (IMO).

Out of the two, gun to my head, I will definitely invest in Sea over Grab today.

[Choon]

Is Grab's ride-hailing business profitable?

I would be very curious if Grab's ride-hailing business can be a more profitable / sustainable business than ComfortDelGro.

• Grab has an app, CDG has a similar app.
  
• CDG is able to augment its group profitability by selling diesel to drivers.
  
• CDG is able to augment its is able to augment its group profitability by inspecting taxis at Vicom.
  
• CDG is able to augment its is able to augment its group profitability by repairing and maintaining taxis at CDG Engineering.
  
• CDG is able to augment its is able to augment its group profitability by advertising on its taxis with Moove Media.