Grab is a cheap risk-reward play; stock may double if profitability targets are met via financial services and acquisitions.

We continue our global search for value, and one of the stocks you have asked us to look at over time is Grab. The business is operating and the company is growing, but the stock, since its initial public offering through a special purpose acquisition company (SPAC) a few years ago, like many "bubble" companies, has not really delivered the desired results .

Is it now a fraction of what it once was as a promising investment deal?

When we talk about " SPAC", they were offered for subscription with a valuation of 40 billion. We are now at 11 billion. They also raised 4.5 billion in cash. In practice, you are now paying double what they raised in cash, not what the valuation was at that time.

If we look at the business, delivery, Southeast Asia, interesting countries, then share buybacks, buying about 10% of the company in the next 12 months. They are acquiring Atome Financial, the financial app, loans, buy now, pay later, and much more in this sector, to integrate that with their user base and try to create a continuous growth cycle .

They are still growing, and everything is growing. Southeast Asia continues to develop rapidly. They are paying everything in cash, 60% now and 40% later based on EBITDA developments, but overall they are looking to generate interest , with adjusted earnings target rising to 1.7 billion.

So, if that is achieved in 2028, we are talking about a growth company trading at five times its operating earnings. Interesting countries: Singapore, Thailand, Malaysia, and now even Taiwan after Delivery Hero's acquisition of GoPanda, and the Philippines.

The goal is growth. This is the goal of financial growth. They haven't been profitable yet , but they are changing that, and with the acquisition of a profitable company, their performance should improve. This should improve their story as well.

Here are the targeted buybacks. If we look a little at the data, the last quarter grew by 20-22%, and even grew better than the first quarter. Free cash flow reached 450 million during the past months.

Investment, of course there are fuel issues if you are a delivery company, but they are dealing with a transitional phase. There will always be business problems when you own a business.

This is normal. We are targeting 20% growth in the future.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) are 700 million. Therefore, the plan is to increase these adjusted earnings over the next two years to effectively double them.

This is possible because they have reached the appropriate profitability and size.

If you look at the cash flows, they have decreased by a billion. They spent, I believe, 400 million on buybacks and 600 million on acquisitions. Okay, that's what we have regarding cash flows.

If you look at the long- term accumulated losses, they amount to 17 billion, but that should be compared to the standard financing before these Asian SPACs were launched , which was preferred convertible bonds.

As the share price rose, this affected the balance sheet as a loss in equity, but for those bonds , they had to assign a greater value to them, and this is not considered a real loss in net income.

However, they lost a lot of money in the first year, and less so thereafter , and now they have reversed that trend towards profitability. Equity has stabilized since the "Spak" IPO ; it declined initially, but is now growing again.

Here you see the cash position, which represents about 30% to 25% of the market value. They will spend these two billion dollars on acquisitions and share buybacks. Therefore, they plan for their business to be highly cash flow-positive in the future, and they can then expand, merge, and create their growth loop to accelerate this.

They also acquired the Food Panda delivery service in Taiwan. Here you can see how they started, by acquiring Uber's delivery operations in Southeast Asia , then launching GrabMart and GrabExpress, acquiring Yayai grocery in Malaysia, Neham Afreeze, and things like that.

And now we have Food Panda Taiwan and the financial app there. This was also paid in cash, amounting to 600 million.

So, they are now really betting with this acquisition that this is it .

Well, the insiders are selling their shares. This has been discussed negatively everywhere, but it is done under a pre-set trading plan in accordance with Article 10b. So, they just sell .

It's not much, 145,000 shares, and 150,000 here. So, half a million or a million here and there, given that the share price here is 400,000. They might buy a new, expensive house in Singapore.

I have looked a little at the text and what they have said recently. There was a board member leaving. Uber remains the largest shareholder. However, the CEO owns Class B shares, so he still controls the company with 60% of the votes.

In any case, they are still building to secure their market for the future, electric vehicles, and this and that, trying to expand and win the delivery game, and now they are adding the financial system as well.

The next stage, and this is one of the issues for these companies, is that they need to invest and build continuously.

However, with financial services, they have , I hope, reached the tipping point towards profitability. If there are no financial shocks or disasters in Asia leading to defaults or interest rate problems, things may be fine.

The growth engine—if you can create that engine and achieve profitability through mobility, delivery, advertising , and financial services, with 50 million customers and integrating all of that—it might look good.

They may be able to achieve this weakness in earnings before interest, taxes, depreciation and amortization ( EBITDA). If these profits double, the share price is likely to double as well.

When comparing delivery, we find that it is a highly competitive market . You have the app. They now have something like a " one-stop shop" that includes financing, with lower profit margins .

So, this is an opportunity to buy something that no one wants at the moment.

It is exposed to Southeast Asian growth that is turning profitable, which reduces the risks a little, but problems always remain. There is an investigation in Vietnam into competition in pricing, payments, and things like that .

If this spreads to other parts of Asia, it could be a problem, but that's the nature of the business. That's the nature of all business. One must deal with these matters.

It's cheap now. Could it get cheaper? Yes. Can it rise? certainly. If they actually reach those profits and start making more consistent share buybacks , then their price will be revalued.

And then you have these applications that simply exist, and will continue to exist.

I'll add "Grab" here to the list of several other companies I've looked at over the past few weeks. There are many interesting risk-and-reward situations , and " Grab" is one of them as well.

However, I think it comes down to the type of companies you are looking for? If you are looking for good risk- reward opportunities where you can quickly achieve 50%, this is interesting.

If all the bad things are postponed for just one year, and the acquisition and merger are successful, and profits appear, then you will make money. If you can also manage the timing, if you can buy now, and then if the price drops further, you buy more and manage that, then that takes work.

So, the risk and reward are interesting, I'll put them here in the research database, and you never know when we might come back to them.