Following an investor call with Grab, CGS-CIMB Research analysts Ong Khang Chuen and Kenneth Tan have kept their “overweight” call on the IT Services sector.

Singapore-based Grab, which is currently unlisted, is a super-app in Southeast Asia. The app offers a variety of services that include food delivery, ride-hailing and financial services, which addresses users’ everyday needs on one platform.

On Oct 4, Grab increased its stake in Indonesian mobile wallet provider Ovo to about 90% through the acquisition of shares from PT Tokopedia and Lippo Group.


See: Grab raises stake in e-wallet Ovo to 90%, buys out Tokopedia


Grab has previously announced that it plans to conduct an initial public offering (IPO) via a merger with Altimeter Growth Corp by the end of 2021.

“Operating in 400 cities across eight countries, Grab commands 72% and 50% market share for ride-hail and online food delivery regionally in 2020, according to Euromonitor. With low penetration rates of online food delivery and on-demand mobility currently, management believes the rapid digitalisation of Southeast Asia presents good growth potential: Euromonitor estimates Grab’s TAM could triple to US$185 billion by FY2025,” write Ong and Tan.

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According to Grab’s management, the group currently enjoys industry-leading margins for its Mobility segment. This is thanks to an optimised cost structure through its super-app strategy and proprietary technologies such as mapping and demand supply matching.

“Grab believes there is room for further cost efficiencies and aspires to achieve longer-term EBITDA margins of 60%, 15% and 30% for its Mobility, Delivery and Financial Service segments, respectively,” note the analysts.

Furthermore, the group has indicated that it is committed to delivering a positive social impact through the economic empowerment of its driver-partners and small businesses. It is also looking at reducing its environmental footprint.


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Currently, the IT Services sector comprises NYSE-listed Sea Limited, which Ong and Tan have given a target price of US$345 ($467.80).

“We like Sea for its solid execution across core businesses, as well as expanding [its] total addressable market (TAM) through ventures into e-commerce in Latin America, and food delivery in Southeast Asia,” write the analysts in a sector report dated Oct 1.

Photo: Bloomberg