- Grab (GRAB) might hurt its own mobility margins to make Gojek irrelevant in Singapore
- Sea Ltd. (SE) is gaining market share in the delivery business in Indonesia at the cost of Grab & Gojek;
- Grab’s fintech business to suffer a setback from GoTo in Indonesia
- Downgrade GRAB to HOLD while SE remains a BUY as both stocks are trading at similar valuations
Grab might hurt its own mobility margins to make Gojek irrelevant in Singapore. With its recent rise in driver incentives and consumer discounts, Grab wants to halt Gojek’s mobility share in Singapore. With a small user base and mounting losses, Gojek might lose the business case to launch delivery & payments in Singapore.
Sea Ltd. (SE) is rapidly gaining market share in the delivery business in Indonesia. SE gained 8% market share in Indonesia’s delivery business in 2021 since its launch in March 2021 and is likely to at least double its share in 2022F as evident from its promotions.
Grab’s fintech business to suffer a setback from GoTo in Indonesia. Grab’s OVO might find it hard to completely replace the loss of Tokopedia’s payment business despite the addition of new ecosystem partners in 2022 in our view.
E-commerce monetisation on the rise. Sales generated by Shopee Ads tripled from 1H21 to 2H21, and we expect this to continue in 2022. Shopee will also be building a sampling channel to help brands attract new shoppers.
SE should trade at atleast 30% premium to GRAB due to its bigger scale and higher margin potential. We cut GRAB’s FY22F/23F adj revenue by 9%/11% and raise its adj EBITDA losses sharply by 74%/92%. Our previous bear-case scenario has become our base-case for GRAB. Our revised TP for GRAB is US$5.60 translating to 5x FY22F adj revenue. Our new bear-case TP for Grab is US$4.12. We prefer SE at unchanged TP of US$272. Our bear case TP for SE remains at US$147. Its e-commerce business in Southeast Asia is likely to see narrower losses in 4Q21F and EBITDA breakeven in 2H22F, renewing faith in its growth strategy. Our checks also indicate good traction for Free Fire Max