Grab drives home how much investors now see red

GrabWheels helmets are pictured in Singapore August 22, 2019. Picture taken August 22, 2019. REUTERS/Edgar Su

BANGALORE, Aug 26 (Reuters Breakingviews) – Super-app Grab is moving in the right direction. Cities in Southeast Asia are bustling once more, and that’s boosting growth at the Singapore-based ride-hailing business. After splurging on incentives during the pandemic lockdowns to retain drivers, adjusted EBITDA at the unit – which accounted for half of revenue in the June quarter – are back up at the company’s long-term target of 12% of gross merchandise value.

While the deliveries business will not grow as quickly as before as people return to restaurants, Grab’s new focus on higher-spending customers means it expects to break even in the second quarter next year, six months earlier than previously estimated. The company is slashing incentives and has shuttered some “dark stores” that helped it move groceries on demand. Overall, the SoftBank-backed (9984.T) group reckons full-year revenue will be closer to the upper end of its guidance at $1.3 billion.

Investors are laser-focused on the widening losses, however. Grab’s $233 million adjusted EBITDA loss in the second quarter increased 9% year-on-year as it continues investing in its up-and-coming fintech business. The stock plunged 12% on the earnings and the enterprise trades at less than 5 times forward sales per Refinitiv, compared to 35 times in December when its shares debuted in New York after a merger. It will take a lot more for the market to unsee the red. (By Pranav Kiran)

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Editing by Una Galani and Katrina Hamlin

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