Grab's not yet profitable, but investors may give it 'leeway' to invest in new growth areas, analysts say


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SINGAPORE — Investors will be keeping a close eye on when Grab will turn profitable after its record-breaking SPAC listing, according to Tom White, senior research analyst at D.A. Davidson.

“There’s obviously a growing scrutiny from investors about a path to profitability,” White told CNBC’s “Squawk Box Asia” on Wednesday. But there has been a shift in investor sentiment from a singular focus on growth and market share gains to a more balanced approach, he said.

While still focused on breaking even, investors will likely also give the Southeast Asian ride-hailing firm more leeway to invest in new product categories, said White.

The Grab Holdings Inc. app is displayed on a smartphone in an arranged photograph taken in Singapore, on Friday, Sept. 25, 2020.Ore Huiying | Bloomberg | Getty Images

Singapore-headquartered Grab announced on Tuesday it will go public through a SPAC merger with Altimeter Growth Corp. — a deal set to value the ride-hailing company at $39.6 billion. It was the world’s largest blank-check merger involving special purpose acquisition companies, which are set up to raise money to buy over private companies such as Grab.

Path to profitability

Grab as a whole is still not profitable. It lost $800 million in 2020 on an EBITDA basis and projected a $600 million loss for this year, according to a regulatory filing.

EBITDA — a measure of overall financial health for a business — stands for earnings before interest, taxes, depreciation and amortization. It is a common earnings metric used by tech companies even though seasoned investors are skeptical about it.

Grab said EBITDA for its transport segment turned positive since the fourth quarter of 2019. Adjusted net revenue last year came in at $1.6 billion and is projected to jump to $4.5 billion in 2023 — Grab predicted it might generate $500 million of EBITDA in two years.

“They do have, I think, a nice story to tell when you look at the two core segments,” said White, who also covers other online ride hailing and delivery apps like Uber and DoorDash.

“All their markets in ride sharing are at least EBITDA profitable, so, presumably, not burning cash. Five