doctorpot1 shared · May 1, 2023 21:17

Investing in GRAB, I'm just gonna do my own way, ignoring all the noises

$Grab Holdings (GRAB.US)$ had been on a downwards spiral ever since the SPAC merger. Many well known investors such as $Morgan Stanley (MS.US)$, $Blackrock (BLK.US)$, Temasek Holdings, Fidelity, Altimeter, and $T. Rowe Price (TROW.US)$, had pumped in US$4 billion in private investment into $Grab Holdings (GRAB.US)$ which is backed by $SoftBank (9434.JP)$. Once the deal was completed, Grab briefly rised to $18.109 a share for a short moment, before it starts its journey towards $2

I think GRAB "IPO-ed" at the perfect timing, right at the peak of the stock market craze. Thus, it was able to rake in huge investments cash. After they had IPO-ed, fed started raising interest rate and market started dumping stocks of companies that isn't make a profit. Loss-making companies like $Palantir (PLTR.US)$ and $Uber Technologies (UBER.US)$ met with similar fate, as seen in the chart above. If GRAB had "IPO-ed" 1 year later, I doubt they will get much cash out of investors.

So is this the end of Grab and all loss making companies?
Maybe? Maybe not? From my understanding, after a bear market, comes a bull market. After a recession, comes a period of growth. So for me, the key is whether they have the cash to weather the storm, and whether they have the capability to stop the bleeding of cash. This principle is the same for us when we are in a recession, do we have the cash to weather a recession, and can we lower our expenses so that we can last longer.

Does Grab have the cash to weather the storm?
Thanks to the crazy bull run and SPAC mania of 2020, Grab had raked in a ton of cash. Looking at their 2022 balance sheet, They have $4.91B in cash but only $2.51B in total liabilities. That means that if they were to use their cash to pay off all their debts, Grab will still have $1.4B in cash. This $4.91B should be enough for them to weather the storm for a while. Hopefully the storm will pass sooner than later

Does Grab have the ability to stop bleeding cash?
Ever since the economy weakened in 2022, companies left, right and center started to layoff workers to reduce cost. Grab had been lowering their cost too. In their FY 2022 annual report their CFO mentioned that

We are accelerating our group breakeven outlook on an Adjusted EBITDA basis to the fourth quarter of 2023, earlier than our prior expectations of the second half of 2024. --Peter Oey, Chief Financial Officer of Grab.

Grab Holdings: Current report of foreign issuer

So Grab had brought forward their breakeven date by 6 months. Which means that they can stop bleeding so much cash, 6 months earlier than expected. Grab is set to announce their 2023 Q1 results on May 18, 2023 at 8:00 PM SGT in their Grab 2023 Q1 Results Webcast. I do hope that they will announce that this breakeven date will be brought forward again by another 6 months

So why Grab?
Given all the negative headwinds, why am I still investing in Grab? Cheeky answer will be that Temasek bought a ton of shares at $10 each. If my buy in is lower then them, it is not bad right? If they are right, my % return will be higher than Temasek. If they are wrong, my capital loss will be lower than Temasek Sounds like either way, I still will beat the smartest people in Temasek who invested in Grab

Long answer will be that if I don't load up in a bear market, I might not get the chance to go in at such a low valuation ever again. Am I taking risk? Yes, but in a controlled manner. I'm not YOLOing all my money into Grab, just in case it goes to $0 hahahaha

Grab is used by 1 in 20 people in South East Asia, and growing. I can't imagine Grab disappearing anytime soon. If they are gone, then what will Singaporeans do? Go back to the streets to flag down taxi like the good old days? Does the new generation even know that you can hail a cab on the streets by waving at them?

During the pandemic when so many people are laid off, Grab gave them a job. If Grab disappeared, where will all these worker go to? Maybe that's why Temasek is involved, if shit hit the fans, they can "bail out" Grab like how they "bail out" $SIA (C6L.SG)$ and Sembcorp Marine ( $Seatrium (S51.SG)$)

Grab is also growing the number of merchant-partners which is crucial, as Grab relies on the network effect. More merchants attracts more consumers, which means more business for the merchants and the drivers. Grab in a sense helps in our government's goal of digitalisation. Enabling many mom-and-pop shops and smaller F&B to go digital, with digital payment and an online presences.

The more merchants and partners onboard, also mean that they have more customers that they can loan money to for their digital banking business. This is the key piece that makes me excited in their business. Why? Because bank's profit margin are amazing, it is a potential cash cow.

With their collaboration with multiple partners, the digibank will already have a pool of more than 132 million potential depositors. Grab also have 860k merchants-partners that they could provide loans to. It does seems like their potential for success is so much higher. So it all boils down to execution and leadership right now. Grab mentioned in their report that they expected the digibank to break-even in 2026 though, so reaping the reward from Grab will probably take a long long time.

Well, so long they produce good report card every year that shows business growth and cost cutting measures, I think they should be able to survive a downturn and bounce back stronger when the storm is over. Grab made our lives easier, enabled many laid off workers to have a job, enabled many merchants to go digital and grow their business, and they have a viable business model. With such a strong value system, I doubt they will disappear anytime soon. Thus, I'm still going to hold my investment in Grab and ride this long and volatile journey with them.

But all investment, especially stock picking, comes with risk. So I'm going to invest prudently, and hedge the investments using options too. In this bear market, do invest safely!

Source: Grab to list on Nasdaq on Thursday after Altimeter investors approve Spac merger, These Two E-commerce Platforms Are Bringing Forward Their Breakeven Timeline, Investors dumping equities, cash amid fears of hawkish fed, Bank of America says, Companies & Markets - THE BUSINESS TIMES, GRAB Investor Day Presentation

$DiDi Global Inc (DIDIY.US)$

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Chris Ivan Ang : I agree with your analysis from a fundamental standpoint. Their cash burn rate however is hard to pinpoint because they may have to burn more later for upgrading.

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doctorpot1 OP Chris Ivan Ang : yea the burn rate is a key figure to keep a close eyes on. recently Grab prepays $807 million in 2026 debt with extra cash, which looks like they are confident that they have enough cash.

In a high interest rate environment, borrowing money to survive will be very very painful hope the next earning report, they will show us more cost cutting measures to protect their cash

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Chris Ivan Ang : Lucky they have lots of cash inside Grab Wallet. This helps to offset short term interest. Anyway the near term PT before earnings looks like it will hit 3.26 from a technical analysis.

My core holdings has this at around 2.9 which I’ll keep until 2026

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doctorpot1 OP Chris Ivan Ang : 2026 hope by then they will show us that digibank will be a big fat cash cow

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Chris Ivan Ang doctorpot1 OP : 100% agree. That’s why my Tgt year is 2026.

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Ixy The Cat : I too hold Grab shares not because Temasek has a stake in it (a horrible benchmark imo) but because the company is a survivor in the market. With a sizeable war chest of funds, that gives it the leeway of time to find investments that will generate steady returns, as we all know its core biz operates on razor thin margins. It's current share price is fair value but I think its a longshot if you're looking for big returns.

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Nase : Grab is moving towards being a bank so at the end Anthony looks at his grandfather and see TC was more than manufacturing Nissan Cars and their family owns like 50 over businesses

Basically I don’t think Grab will run out of cash but the only issue is will the investors outside of SEA get excited?

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doctorpot1 OP Ixy The Cat : yea the company have a sizable war chest but they are also bleeding cash quite quickly. The management need to stop the bleeding quickly, so that they can survive for longer.

if their execution is great, then in the long run, we probably be rewarded handsomely for taking on the risk

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doctorpot1 OP Nase : I hope they don't run out of cash too to get investors excited, they need to show better and better numbers if the numbers are good, investors will come. or maybe we wait for JPow and his money printing machine to go brrrrrrrrr

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lucky stocks : Didi was delisted and ths is Didi global Inc, if want to invest is this counter Didi global to get?

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doctorpot1

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crawled out of poverty, working towards FIRE!! (financial independence, retired early)

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