Grab Holdings Ltd, Southeast Asia’s biggest ride-hailing and food delivery firm has forecasted upbeat 2023 revenue and pulled forward its profitability timeline on hopes that consumers will continue to rely on its services.
The decade-old Grab, a household name in eight Southeast Asian countries, and its rivals had benefited from higher demand for delivery services during the COVID-19 pandemic, while consumers have relied on the app for their daily commute as offices reopened.
The Singapore-based company, which has spent heavily on incentives and promotions to gain traction among customers, is now scaling back on those expenses and launching more products to make services affordable even as it implements cost-cutting measures.
Still, Grab is hoping the rebound in tourism will help its ride-hailing business return to pre-pandemic levels by the end of the year.
A wider-than-expected loss, however, in the fourth quarter sent the company’s shares down about 6% in early trading on Thursday.
The company now projects its 2023 revenue to come between $2.20 billion and $2.30 billion, compared with an estimate of $1.97 billion, according to Refinitiv data.
“There is growing consumption in the (Southeast Asia) region, a population that craves on-demand digital services,” Chief Executive Officer Anthony Tan told analysts.
The company brought forward its forecast for group break-even on an adjusted core earnings or EBITDA basis to the fourth quarter of 2023 from a previous target of the second half of 2024.
Grab forecast 2023 loss before interest, taxes, depreciation, and amortization between $275 million and $325 million. The metric, keenly watched by investors as a measure of profitability, was $793 million for 2022.
Adjusted loss of 10 cents per share in the reported quarter came in wider than the forecast of 7 cents.
“At the end of the day, this is not the market environment for businesses losing money … The market wants to see free-cash-flow and profit,” said Thomas Hayes, chairman at Great Hill Capital in New York.
“It’s solid overall, but losing money is a problem.”