How Much Is Grab Worth?

by Trefis Team
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Grab is a Singapore-based company which offers ride hailing, ride sharing and food delivery services via its mobile app in Southeast Asia. In addition to Singapore, the company’s services are available in countries such as Malaysia, Indonesia, Thailand and the Philippines. In March 2018 Grab acquired Uber’s operations in Southeast Asia and Uber now holds a 28% stake in Grab. This deal is likely to drive significant growth for Grab – which already dominates the Southeast Asian ride hailing market – with reportedly more than 60% market share in the region. Grab was valued at $10 billion in its most recent funding round, where it raised $2 billion for future growth. The company expects to double its revenues in 2019, as it integrates Uber’s operations and forays into bike sharing and digital payments. Our interactive dashboard Estimating The Valuation Of Grab looks at Grab’s key value drivers and the likely upside in its valuation if the target of 100% growth in revenues is met in 2019.

Grab has witnessed significant growth in rides booked via the company’s app over the last two years. Its number of users nearly doubled between 2017 and 2018, and average daily rides have increased significantly from around 2.5 – 3.5 million in 2017 to 6 million in 2018. For 2019, as the company benefits from the acquisition of Uber in the region, expands its bike sharing initiatives and builds further on its dominant market position in Southeast Asia, we expect significant growth in the company’s number of users. This will drive growth in the total number of annual rides and boost revenue growth.

Based on limited data available for the total number of rides and total revenues, we estimate the average gross revenue per ride for the company to be around $2.50 in 2018. We forecast this number to increase to $3 in 2019, as the company establishes its dominance in Southeast Asia (post-acquisition of Uber’s business) and sees increased demand for longer rides. With reduced competition, Grab can also look to withdraw discounts, leading to higher revenues. Grab charges a 20% commission from its drivers and we expect this number to remain steady over the next few years. You can modify the blue dots here to arrive at your own estimate of Grab’s revenue per ride and analyze its impact on the company’s valuation.

 

 

 

 

 

 

 

 

Based on its most recent valuation and expected revenues for 2018, Grab commands an estimated revenue multiple of around 10x.  This is higher than Uber’s revenue multiple of about 5x based on its most recent valuation of $76 billion in August 2018 and Didi Chuxing’s valuation multiple of around 7.5x. If the company is able to achieve net revenues of around $2 billion in 2019 (per its own target), its valuation could potentially reach $16 billion with a lower revenue multiple of around 7x (lower than its current multiple as growth is likely to slow down in future years).

Grab is focusing on growth initiatives and has an ambitious goal of becoming an “everyday app” and the company is diversifying into areas such as online grocery, food delivery and payments. However, regulatory hurdles and competition from local players are likely to be its key challenges, and the company’s ability to navigate these will be critical for future growth.

While Grab is not profitable yet, its market dominance, high volumes and expansion into food delivery and other areas should lead to economies of scale, driving profitability in the future. We believe Grab still has strong growth potential, and is likely to see some upside in its valuation in the near term even if multiples decline. You can modify any of our key drivers and forecasts to arrive at your valuation for the company using our interactive dashboard here.

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