Yahoo Finance Grab to explore new growth opportunities although geographical expansion unlikely
Heading into 2QFY2023, Grab has seen stronger sequential improvement for both food and ride-hailing businesses.
Grab will seek for new growth opportunities although a geographical expansion is unlikely as it continues to focus on Southeast Asia, Citi Investment Research analysts Alicia Yap and Nelson Cheung note in their May 26 report.
Citi had recently hosted the Pan-Asian Regional Investor Conference, which was participated by Grab’s head of strategic finance Ken Lek who shared latest business updates.
During the conference, Lek shares that it is possible for Grab to expand its food technology across both online and offline channels through the introduction of dining restaurant deals and other loyalty programmes. This would require deepening relationships with food and grocery merchants.
Despite being well-positioned as an instant on-demand platform, the company does not expect to explore non-instant services such as same-day and next-day delivery as it may involve additional capex investment and build-up of warehouse capability.
On May 25th, Grab announced that its co-founder Tan Hooi Ling will be stepping down from her official position and will be transitioning into an advisory role. Citi analysts believe this likely have been planned for a while, expecting a smooth transition given there has been relevant and suitable leadership in place.
Heading into 2QFY2023, Grab has seen stronger sequential improvement for both food and ride-hailing businesses, remaining confident to maintain its growth outlook, margin target and market share expansion.
Grab’s deliveries segment’s adjusted ebitda margin reached 2.6% of gross merchandise value (GMV) in 1QFY2023, mainly driven by significant reduction in consumer promotion spending as the region reopens their border, which led to normalisation of food delivery behaviours.
Meanwhile, in its financial services segment, Grab is expected to launch its digibank in Malaysia and Indonesia in the second half of the year. Currently, the company is undergoing active discussion with regulators to lift the deposit cap, allowing for faster expansion of its loan business.
The company believes that the revenue contribution by its digibanks will be limited in the near-term, targeting to achieve long-term breakeven by 2026.
The company expects further optimisation of unit economics from driver and consumer perspectives. From a driver perspective, Grab will improve the cost efficiency through better routing and order matching mechanics, while consumers’ optimisation can be achieved by increasing the penetration of GrabUnlimited.
GrabUnlimited is expected to fulfil three objectives — a subscription model to increase stickiness; induction of greater transaction frequency; as well as minimum floor for basket size. Currently, users of GrabUnlimitedorders 3.7x higher than normal consumers, with more than a quarter of deliveries GMV contributed by GrabUnlimited.
Citi is keeping “buy” on Grab with a target price of US$4.80 ($6.50). The analysts believe Grab is gradually building an execution track record, with possible upside surprise of the company turning ebitda breakeven ahead of plan.
Shares in Grab closed 4 cents higher or 1.33% up on May 30 at US$3.04.
See Also:
Click here to stay updated with the Latest Business & Investment News in Singapore
Japan Foods serves strong end to FY2023, RHB raises TP to 65 cents
DBS's digital prowess could drive more efficient business processes over the longer term: CGS-CIMB
Analysts maintain 'buy' on Grab following margin improvements
Get in-depth insights from our expert contributors, and dive into financial and economic trends
