Research Notes: Grab And AerSale

We look at the "Uber of Southeast Asia", and the plunge in ASLE

Highlights:

• Grab Holdings, the “Uber of Southeast Asia” has been dead money for two years, even as peers rally.

• There’s an intriguing argument that the bull case for GRAB is hidden by losses in its financial services division.

• Whether that case needs to be bought now is up for debate; Grab clearly still has work to do in gaining investor confidence.

• AerSale’s ugly Q4 report decimates the bull case. A new one can be built, but it’s not likely to arrive soon.

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Grab Holdings beat Uber in Southeast Asia. That’s mid-2010’s Uber, the most valuable startup ever, backed with billions of dollars in capital and with access to tens of billions more. The two companies had a price war in several markets, and it was Uber that capitulated. In a 2018 deal, Uber took 27.5% of Grab (its stake is now about half as much) plus a board seat (which remains occupied by Uber chief executive officer Dara Khosrowshahi).

At Thursday’s close, Grab has a fully-diluted market capitalization of $12.5 billion, and an enterprise value just above $7 billion. Relative to more recent marks, that valuation looks like a disappointment.

GRAB is down 68% from the $10 price at which it merged with a SPAC (special purpose acquisition company) in 2021. But that merger was executed at an enterprise value over $30 billion, and, we believe, the highest valuation ever in a SPAC deal.

The multi-year performance of the equity isn’t exactly inspiring, yet this is a much larger, business than it was six years ago. The market doesn’t seem to care: both Uber and its rival Lyft have rallied nicely of late, while GRAB has been left behind.

It’s hard not to wonder whether GRAB might be the next one to rally.

source: Koyfin (one-year chart)

How Grab Got Here

In 2011, Harvard Business School classmates Anthony Tan and Tan Hooi Ling won second place in an HBS New Venture competition. Using the $25,000 prize money, they launched MyTeksi, an app for booking taxis in Malaysia (the company has since moved its headquarters to Singapore). The next year, the name was changed to GrabTaxi.

GrabTaxi quickly expanded geographically (it now operates in eight countries) and into new end markets. In 2014, the company entered the ride-hailing market with GrabCar. It also launched GrabBike, for motorcycle taxi rides. The next year, GrabExpress marked the company’s move into deliveries. Food and grocery delivery followed. In 2017, the company (now known just as Grab) moved into financial services. Those operations now include a full-on digital banking business and the OVO digital wallet.

What Grab is now is a “superapp” (the company actually uses that term itself), along the lines of China’s WeChat or what Elon Musk envisions for X:

source: Grab Investor Day presentation, 2022

Grab operates in eight countries¹ in Southeast Asia, and now serves over 500 cities. It is, per multiple sources, the leading business in the region in both food delivery and ride-hailing.

In 2023, more than half of Grab’s GMV² and revenue (~$21 billion and ~$2.4 billion, respectively) came from Malaysia and Singapore, with total distribution as follows across its segments:

• Deliveries: 50.6% of revenue; 48.5% of GMV

• Mobility: 36.8% of revenue; 25.8% of GMV

• Financial Services: 7.8% of revenue; 24.7% of GMV

• Enterprise And New Initiatives³: 4.7% of revenue; 1.0% of GMV