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Grab Holdings: Bag of Assets in Southeast Asia

Grab Holdings Limited (NASDAQ:GRAB) stock has become a bag of assets after buying a Malaysian grocer.
Source: Twinsterphoto / Shutterstock.com
Grab was founded as a Southeast Asian version of Uber (NYSE:UBER), but it has since gone far beyond…

Grab Holdings Limited (NASDAQ:GRAB) stock has become a bag of assets after buying a Malaysian grocer.

Source: Twinsterphoto / Shutterstock.com

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Grab was founded as a Southeast Asian version of Uber (NYSE:UBER), but it has since gone far beyond that niche. It is also the Southeast Asian Doordash (NYSE:DASH). Its fintech app makes it look like Paypal (NASDAQ:PYPL) and its latest deal makes it more like Kroger (NYSE:KR).

The strategy of company founder Anthony Tan is to dominate the e-commerce sphere in Singapore and the rest of Southeast Asia with a “superapp” offering a wide variety of services. By becoming ubiquitous and essential, Tan hopes to lead the region into the 21st century.

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The Grocery Deal

Where does a grocery fit into this? Jaya Grocery gives Tan an ally in the Teng family of Malaysia, which has been trying to sell Jaya for over a year. As InvestorPlace.com’s Eddie Pan explained when the deal was announced, Grab is paying the equivalent of $360 – $430 million for the chain, which was profitable with sales of about $320 million last year.

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The deal gives Grab partners and heft at a time when it needs them. Since coming public through a special purpose acquisition company (SPAC) called Altimeter Growth in early December, Grab stock has gone nowhere but down. It opened Feb. 16 at about $6 per share. But that still gives it a market cap of $21.8 billion, so the Jaya deal looks accretive.

Grab will announce results for its fourth quarter on Mar. 3 before the U.S. market opens. Analysts expect a loss of 15 cents per share, which figures to $562 million on sales of $177 million. 

Analyzing Grab

The fall of Grab stock is obvious. It is a growth company and those aren’t in fashion. It is unprofitable and that is not what Wall Street wants. The third quarter numbers, announced in November, also displeased some analysts, who began questioning the growth thesis.

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On the other hand, Grab operates within a vast, fast-growing market. It offers the kinds of online services that are proven to work elsewhere. That may be why 8 of the 9 analysts following Grab at Tipranks tell people to buy it. The one seller has a price target of $4.50 per share. Even if it hasn’t bottomed, it is close to it.

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What you’re really buying with Grab is Chief Executive Officer Anthony Tan. He is a handsome Harvard Business School graduate who came back to his father’s auto business, then struck out on his own in 2012. His early partners in Grab included Toyota (NYSE:TM), Softbank (OTCMKTS:SFTBY), and Didi Global (NYSE:DIDI), which was briefly listed on the NYSE.

The fall of the stock is bringing in new partners, like Daniel Loeb’s Third Point Management, which exited Paysafe (NYSE:PSFE) and Didi to buy his stake. A recent analysis of the company’s discounted cash flow shows it is undervalued by 39%.

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The Bottom Line on GRAB Stock

There are so many moving parts to Grab that I find it hard to recommend.

The third quarter showed it involved with $4 billion in transactions, but only pulling down $157 million in revenue. Tan blamed lockdowns in Vietnam for the shortfall.

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The Jaya transaction has yet to close, but it will have a material impact on these numbers. Jaya’s regular volume is double Grab’s sales. It may look like growth when it is factored in, but think of it as cash flow, the equivalent of Amazon’s (NASDAQ:AMZN) Whole Foods.

Whether you are interested in the stock depends on what you think of Tan. If you see him as a good speculation, don’t jump in with both feet. Maybe dip your toe in with money you can lose and see how it does over the next six months.

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On the date of publication, Dana Blankenhorn held a long position in AMZN. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, available at the Amazon Kindle store. Write him at [email protected], tweet him at @danablankenhorn, or subscribe to his Substack.

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