Equity Analysis /
Singapore

Grab Holdings: Five factors that the market is missing

  • Grab has tanked 31% since its IPO, underperforming the NASDAQ by 28%

  • We encourage investors to focus on five virtues of the stock

  • It has the best super-app prospects in EM

Grab Holdings: Five factors that the market is missing
Nirgunan Tiruchelvam
Nirgunan Tiruchelvam

Head of Consumers Equity Research

Tellimer Research
18 January 2022
Published by

Grab has lost almost a third of its value since listing on 2 December 2021. This precipitous fall is way in excess of the Nasdaq decline over the same period.

The Grab sell-off is due to the following factors:

  1. Early investors may have been taking profits.

  2. It was heavily shorted ahead of the listing. The free float has increased from 15% to 40%. This led to heavy shorting of up to six times the free float in the past two months.

  3. Grab has been a sitting duck in the 2022 sell-off. It has fallen 15% ytd in step with the rout in EM Tech.

We are bullish on Grab for the following reasons:

  1. The high short interest ratio means that the prospects of a short squeeze are high.

    The short interest is 3.28 times the average daily turnover.

  2. Grab will announcing its full-year results soon. We expect the company to exceed the market's net revenue expectation of US$729mn, and also beat the market's EBITDA expectation.

    The reason for our confidence is that the food delivery segment is likely to deliver strong returns. We expect 55% revenue growth in food delivery in FY 21.

  3. The stock is likely to trade on two non-financial metrics – Gross Merchandise Value (GMV) and Monthly Transacting Users (MTU). Clients seem to be focusing on these metrics and we expect them to be strong. We expect a 43% yoy rise in GMV per MTU.

  4. Grab's mobility EBITDA margins are rising. We expect Grab's mobility margins to expand in FY 23. Grab is looking to offer aggressive incentives and expand its regional dominance versus GoTo.

  5. We value Grab as a fledging super-app, using DCF methodology. It is corroborated by our SOTP.