Grab Holdings Ltd. shares jumped as much as 15% in late US trading after the Southeast Asia ride-hailing and delivery leader boosted its earnings forecast for the year, helped by cost cuts to tackle intense competition.
The company predicted US$308 million ($411 million) to US$313 million in adjusted full-year earnings earnings before interest, taxes, depreciation and amortisation, more than the as much as US$270 million it had forecast earlier. Third-quarter earnings on that basis were US$90 million, exceeding the US$66.2 million analysts predicted, and Grab also posted its second net income ever.
Grab, the largest of Southeast Asia’s ride-hailing and delivery firms, is trying to prove its cost-cutting drive is yielding results. The Singapore-based company is focused on profits after years of spending to grow its market share and fend off competition. Yet, the firm also needs to show it can maintain healthy balance between profits and growth even as tough competition from rivals including GoTo Group weighs on its ride-share and food delivery margins.
The stock climbed as high as US$5.04 in extended trading, after closing the regular session at US$4.38. Shares of Grab, which had been one of Southeast Asia’s hottest startups, are down about 60% since it went public through a US blank-check company in late 2021. Still, they’ve advanced this year as its losses narrowed, outperforming its main regional competitor, Indonesia’s GoTo.
Revenue this year will be as much as US$2.78 billion, Grab said, rather than the up to US$2.75 billion it predicted earlier. Third-quarter revenue rose 17% to US$716 million, compared with the US$697 million analysts were expecting.
Grab, backed by Uber Technologies Inc., has seen growth slow dramatically from triple-digit rates in years past as customers in the region curb spending to cope with elevated inflation and interest rates. Demand is increasing at a slower pace as Grab’s customer base expands and consumers are less eager to hail a ride or get food delivered to their door in a challenging macroeconomic climate.
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What Bloomberg Intelligence Says
"Grab’s revenue growth might slow slightly in 3Q before potentially picking up in 4Q, when its ride-hailing orders might get a boost from Chinese travelers to Southeast Asia during the country’s Golden Week holiday. Sensor Tower estimates imply Grab’s number of transacting users could jump by more than 10% vs. a year earlier in 3Q, and up slightly sequentially. Yet that might be driven by adoption of its cheaper service tiers, meaning dilution of average spending per user could more than offset a higher user base to weigh on revenue for its mobility and food delivery segments," says Nathan Naidu, analyst.
Grab said it remains optimistic on Southeast Asia’s long-term growth outlook. The company reached 42 million monthly users, still leaving it room to expand in the region of about 650 million people.
“We continue to remain bullish as we arrive at the last couple of months of the year,” Chief Financial Officer Peter Oey said in an interview. “We’re seeing good conversion, from Ebitda to free cash flow, which is another critical piece metric that we look at.”
