Imagine a world in which Uber's hot new business is lending money

The Register - Wed Sep 15 02:52

Singaporean superapp Grab has walked back its 2021 earnings projections, citing COVID unpredictability and rolling government lockdowns across Southeast Asia as the reason for curbing its enthusiasm regarding future financial performance.

Grab bought out Uber's operations in Singapore and has since expanded into e-commerce, payments, and financial services. In its Q2 2021 earnings announcement the company declared announced its 2021 projected post gross merchandise value – a measure of all the product it shifts rather than actual revenue – is now forecast to fall between US$15 billion and US$15.5 billion, down from the $US16.7 billion projected in in April.

Projected adjusted net sales for 2021 got a haircut too – from US$2.3 billion to between US$2.1 billion and US$2.2 billion. Adjusted EBITDA was reset to a range of -$900 million to -$700 million instead of -US$600 million. Meanwhile, net loss shot up from US$718 million in 2020 to US$815 million.

"To give you more context on the COVID situation here in Southeast Asia – the Delta variant has hit the region hard," said Grab CEO Anthony Tan on the company's Q2 earnings call, reminding his audience that lockdown measures are still in place across major cities in the region.

"Lockdowns may have impacted our mobility and fintech business near-term, but we pivoted quickly and doubled down on out serving our communities through the deliveries segment," continued Tan.

Execs told investors that Grab's diversification into payments and financial services has proven crucial to its survival and the source of the company's success since the beginning of the pandemic.

As lockdowns occurred in one country, food deliveries rose and as that country reopened, food delivery decreased and mobility services rebounded. And as one country locked down, another would reopen, thus switching up its areas of profitability.

"What we have also seen from countries coming out of lockdowns is that ride-hailing bounces back faster," said CFO Peter Oey, adding that ride hailing bounced back faster than private cars and public taxis for the company's home country of Singapore, a city-state where vaccination rates have topped 80 per cent but government restrictions remain in force.

"Our Deliveries segment continues to outperform, offsetting the weakness we are seeing in our Mobility segment due to the ongoing movement restrictions," said Oey.

A bright point for Grab this quarter has been its lending business, which reached an all-time high, increasing 4.1 times year on year as compared to Q1 2021.

Tan and exec Ming Maa described the diversification of offerings and cross-selling as Grab's "secret sauce".

"The more services that our users transact on Grab, the more loyal they become as measured by the retention rates of our MTUs," said Maa.

"As the platform becomes more relevant to everyday life in Southeast Asia, we've seen user spend grow by 27 per cent year over year," said Tan.

The company plans to go public in the US this year through a controversial $39.6 billion merger with a Special Purpose Acquisition Company (SPAC).

Oey said the data-slurping mega-app company filed an amended registration statement with the US Securities and Exchange Commission in connection with the merger that day prior to the call.

"We remain on track to become a publicly listed company and to complete our business merger with Altimeter Growth Corp by the fourth quarter of this year," said Oey. ®