Investors Flock to Southeast Asian Tech Stars Slashing Costs
Southeast Asian tech darlings' stock prices have diverged greatly this year as investors crowd into companies cutting costs and shun those with pricey growth plans.
Nasdaq-listed Grab Holdings' shares have been boosted by quarterly results suggesting they are on track for profitability.
But New York-listed Sea's shares saw their biggest single-day plunge after the e-commerce giant said it planned to "ramp up" investments that could lead to losses. The stock moves show investors remain focused on the tech companies' cash-generating ability amid growing regional competition. Enthusiasm for superapps like Grab and GoTo cooled last year as rising inflation and higher interest rates undercut strategies relying on attracting users with expensive perks like free delivery and discounts.
While both companies remain over 60% below their listing prices, Grab is up 15% this year through Friday, reflecting robust demand for its ride-hailing and food delivery segments and cost-cutting measures including its June announcement that it would cut over 1,000 jobs, or 11% of its total workforce.
Grab's shares jumped 11% last Wednesday -- the biggest gain in three months -- after the Singapore-based company brought forward its profitability target and posted a narrower quarterly loss. "We have a line of sight that we want to get the net income, which is the ultimate profitability that you want to achieve," Chief Financial Officer Peter Oey told Nikkei Asia in an interview on Wednesday after the company reported its earnings. "So we're taking one step at a time."
The ride-hailing and food delivery giant now expects to break even on a group level in the July-September 2023 quarter on an adjusted EBITDA (earnings before interest, taxes, depreciation and amortisation) basis, ahead of its previous final quarter target.
"The first step is to get the EBITDA for us," Oey added. "The second step is to get the free cash flow break-even and then we'll get to net income break-even." He did not say when he expected the company to reach those milestones.
Maybank Securities analyst Kelvin Tan said Grab is the "preferred pick" in the regional tech space, given its stronger outlook this year.
Shareholders also reacted positively on 15 August when Grab's Indonesian rival GoTo more than halved its second quarter loss to 3.3 trillion rupiah (£185 million) from a year ago and reaffirmed its goal of becoming profitable on an adjusted EBITDA basis during the fourth quarter of this year.
Shares in the company formed by the merger of ride-hailing Gojek and e-commerce Tokopedia rose 7% that day, the biggest gain since June when CEO Patrick Walujo, an early investor and former banker at Goldman Sachs, took over. For the year, they are down 7.7%.
Grab shares jump on narrower losses and earlier profitability forecast
Sea shares plunge on plans to ramp up costly investments
Investors reward cost-cutting and path to profits in tough environment
Source: Nikkei Asia