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Southeast Asia’s Ride-Hailing App Grab Sees Users Pulling Back

(Bloomberg) -- Shares of Grab Holdings Ltd. fell the most in more than a year after the Southeast Asian ride-hailing and food delivery company reported slowing spending by customers grappling with a higher rate of inflation and rising interest rates.

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While the Singapore-based company reported a narrower quarterly loss, it said its gross merchandise value grew just 3% in the three months through March to $4.96 billion. That’s down from 24% for the full-year 2022 and missed the $5.22 billion analysts estimated. The US-listed shares closed 15% lower at $2.75 Thursday, the biggest drop since March 2022.

The company’s user growth also slowed as competition in Southeast Asia’s ride-hailing and delivery markets intensified, with the contenders luring customers with promotions and lower prices. Grab also has been slower to reduce expenses than regional competitors — as Singapore’s Sea Ltd. and Indonesia’s GoTo Group eliminated thousands of jobs last year, Grab refrained from mass layoffs.

After years of losses, Grab has predicted a breakeven on an adjusted basis in the last quarter of this year. But on a net income basis, it is far from profitability. In the first quarter, its net loss narrowed to $244 million from $423 million a year earlier.

Like its peers, Grab is trying to convince investors of its longer-term earnings prospects even as slower economic growth, rising costs and stiff competition weigh on margins in Southeast Asian markets where consumers have limited spending power. Sea on Tuesday reported earnings that missed estimates while net losses at Indonesia’s GoTo Group exceeded $250 million.

Grab’s adjusted losses before interest, taxes, depreciation and amortization in the first quarter narrowed to $66 million. That compares with the $118 million loss analysts estimated. On that basis, the annual loss is set to be as small as $195 million, compared with $275 million forecast previously, Grab said. Quarterly revenue more than doubled and topped estimates.

Revenue from Grab’s deliveries segment tripled to $275 million. Sales at its mobility arm rose 72% to $194 million, while revenue from its financial services unit more than tripled to $38 million.

What Bloomberg Intelligence Says:

“Grab’s fifth consecutive improving-Ebitda margin quarter shows that it’s on track for its goal to break even in 4Q. Further scaling back of incentive spending, or targeting them at active spenders, should increase revenue earned per dollar of gross merchandise value (GMV) without compromising user retention, but that will likely come at the expense of GMV growth.”

-Nathan Naidu, analyst

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