Grab Full Year Results is out and the company has narrowed its losses to US$158 million from US$458 million (page 4).
It is indeed good to see Grab continuing to efficiense itself. However, I think the company is not out of the woods.
Increase in Cost due to Mandatory CPF Contribution by Employer for Platform Workers
While the Singapore government will be bearing most of the cost during the next 3 years as transit, some costs is still borne by Grab, hence whatever cost savings Grab has been obtaining will be erased for Year 2025.
I forsee its full year 2025 will still be loss making. Furthermore, with more South East Asian countries looking to protect its platform workers, costs borne by Grab in its Delivery and riding segment will rise.
This does not bode well.
Guidance
For FY2025, company us guiding for EBITDA gains of US$470 million, this is a gain from its current US$313 million, if we follow this, this means net income will improve by US$157 million. This means Grab will still be in loss making zone for FY2025.
Revenue Growth
Barring a recession, it is likely Grab will continue to grow revenue. But the truth is that the company is not reporting profits yet, which means growth in asset value. As of now, Grab has continued to make losses. Revenue growth has to grow at least 40% more before it turns profitable. And even if it turns profitable, its profits are minute compared to what Sea Group has obtained.
Grab is in lousy business segments which is cut throat and suffers from high labour unit cost as it expands. The ability to reap economies of scale is smaller as compared to e commerce companies.
While Grab has a book value of US$2.79, I do feel eventually book value will grow but it will take a while. At price of US$4.40, it is overvalued by a mile. Only at US$2.79, would I consider it. For now, I would put it a mile away. This is an overvalued Tech company which is struggling to be profitable after a decade. A terrible company at present.
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