Our thoughts on Grab’s 2023 Q3 results

Last week, Grab released its financial report for the third quarter of 2023. At the adjusted EBITDA level, Grab achieved its breakeven target as communicated previously. 

Several key business metrics exceeded analysts’ expectations: US$29 million group adjusted EBITDA,  beating analysts consensus (avg. US$9.5 million); revenue was up 61% (to US$615 million) on a GMV growth of 5%. Also, Grab’s cash liquidity also increased during the quarter, from US$5.6 billion to US$5.9 billion. 

Here are some of our thoughts:

1. This is not the end. As pointed out in our “Apples to Apples 3.0: benchmarking major tech platforms” report, after achieving positive adjusted EBITDA, there is still free cash flow and ultimately positive net income to achieve. There should be no miracle here; it’s all about continuous improvement in operations and execution in every area and every metric, which Grab is already doing. Grab currently has close to US$6 billion in cash liquidity, which should be more than sufficient for it to achieve its next targets.

2. GXS, Grab’s digital bank JV with Singtel, has started contributing to the group’s lending business. Grab’s own credit business under GrabFin, coupled with GXS, contributed to a roughly 50% YoY increase in disbursed loans in the first nine months of 2023. We consider Grab’s strategy in consumer credit to be relatively conservative, and there doesn’t seem to be a plan to develop a mini-programme platform (like that of Wechat/Alipay) yet;

3. Grab has been optimistic about its ads business as a key driver of revenue growth. In Q3, they specifically emphasised that the total active advertisers “joining the self-service platform” grew by 83% YoY, with average spend of these self-service merchants increasing by 44$ YoY. In our opinion, ads business and commissions are similar in the way that they constitute the percentage of revenue merchants are willing to pay for the orders – the psychology and behaviour, however, is very different: ads are used to grow the business, and thus proactive;

4. The number of Monthly Transaction Users (MTUs) on Grab continues to grow, from 34.9 million in the second quarter to 36 million in the third quarter. The broadened active user base seems to have been contributed by multiple initiatives including batched orders (which according to Grab reduced delivery fee by 8% on average), and subscription programme GrabUnlimited. Grab’s MTU is about 10% of Southeast Asia’s urban population – which means there should be ample room for growth. In recent years, Grab has been working hard to make its services more “affordable” to gradually raise its user base. Considering various factors such as the macro environment, infrastructure, and current interest rates, this will be a long-term, gradual process;

5. During the earnings call, Grab’s M&A activities were also brought up, such as rumours of acquiring competitor Foodpanda. In response, Grab’s COO, Alex Hungate, mentioned, “we don’t operate for M&A. We operate to provide the best experience and the best services for our customers, merchants and drivers while trying to be profitable as a platform as you can see from our strategy”;

6. Recently, Foodpanda’s APAC CEO was removed after leaking information about the negotiations. We believe this may have limited impact on the likelihood of the acquisition, but could affect price expectations;

7. We just started working on the 2024 edition of the “Food Delivery Platforms in Southeast Asia” report, which is expected to be released in January 2024. If you have insights into the ecosystem and are willing to share, please feel free to contact us;

8. As for the acquisition of Trans-cab, a local taxi operator in Singapore – while we don’t believe this will have a significant impact on the competitive environment, we estimate that Singapore’s competition watchdog may take several months to carefully study and consult various experts before making a ruling;

9. Grab has highlighted in a few earnings calls about the focus on relentless execution and continuous operational improvement. This might sound boring, but it is the recipe that brought companies like Pinduoduo and Meituan to profitability, and beyond;

10. And by the way, as in the previous quarter, Grab has once again used a female delivery rider as the cover image for its financial report presentation:

Of course, these are just some of our thoughts. We highly recommend you to read the transcript of the earnings call to get a sense of what is being communicated, and form your own opinions.