Grab Holdings Reports Conservative Revenue Outlook, Weighs GoTo Takeover

Singapore, 10 February 2023 - Grab Holdings Ltd. shares declined after the company's full-year revenue forecast fell short of analysts' expectations, signaling caution amid increased competition in Southeast Asia's ride-hailing and food delivery market from GoTo Group.

Modest Revenue Growth Projection

Grab anticipates a 19% to 22% rise in sales to $3.33 billion to $3.4 billion this year, below the average analyst projection of $3.5 billion. This forecast comes despite a 23% decline in quarterly net income to $27 million, which was mitigated by strong holiday tourist demand.

Shares Drop in After-Hours Trading

Following the announcement, Grab shares dropped approximately 11% during US postmarket trading. Chief Financial Officer Peter Oey attributed the conservative guidance to prudent planning, noting that the company's outlook has often improved throughout the year.

Financial Discipline and Expansion

After years of market share acquisition and competitive spending, Grab is transitioning towards financial maturity. It has reduced expenses and implemented cost-cutting measures, similar to its investor, Uber Technologies Inc. The company has also pursued strategic acquisitions to expand into new areas, such as digital finance and logistics.

Target: Positive Net Income by 2025

Oey expressed the company's goal of achieving positive net income by 2025 and emphasized its focus on growth rates exceeding 20%.

Potential GoTo Acquisition

Grab is reportedly weighing a takeover of GoTo at a valuation of over $7 billion. Such a move would significantly alter the regional market landscape, with the combined entity capturing a 60-70% share of Southeast Asia's on-demand services market. However, regulatory hurdles remain a significant obstacle.

Regulatory Scrutiny and Integration Challenges

Analysts highlight the potential for intense regulatory scrutiny and workforce retrenchments during the integration of Grab and GoTo.

Growth Slowdown and New Initiatives

Grab's growth has decelerated significantly from previous years as consumers face inflationary pressures. The company is betting on new initiatives in digital finance and delivery services to drive revenue acceleration from 2025 onwards.