What Uber's first-ever GAAP profit suggets about Grab's path to profitibility

Opening Bell 🔔 is Tech in Asia’s free newsletter that brings you the biggest news and latest trends around Asia’s publicly listed tech companies. [Read from your browser]( Opening Bell 🔔 Welcome to the Opening Bell! Delivered every Monday via email and through the Tech in Asia website, this free newsletter breaks down the biggest stories and latest trends on Asia’s publicly listed tech companies. If you’re not a subscriber, get access by [registering here](. --------------------------------------------------------------- Written by Simon Huang Journalist Hello {NAME} I remember the first time I used the Uber (UBER, NYSE) app. It felt like magic. I was sold on the clean interface, convenience, and - back then - relatively cheap fares. It sure beat the uncertainty of waiting on the street to hail a taxi. Much has changed since then. Uber left Singapore - and the wider Southeast Asian market - in 2018, selling its business in the region to local player Grab (GRAB, NDAQ). Yet, Uber is very much alive and kicking in other parts of the world. Last week, it announced its first quarter of [GAAP]( operating profit for the second quarter of 2023. It’s been a long time coming. Uber CEO Dara Khosrowshahi [attributed]( this achievement to “a combination of disciplined execution, record audience, and strong engagement.” Given the similarities in their businesses, it’s natural to wonder what this means for Uber’s erstwhile rival Grab. Comparing the two isn’t as straightforward as it seems - apart from having different business units and operating in different geographies, the companies also account for various financial metrics differently. Yes, this includes even basic items like revenue. However, Uber’s journey to profitability is still a decent guide to what Grab’s path ahead may look like. If the Southeast Asian super app does follow in the footsteps of its US counterpart, we can expect it to achieve quarterly operating profit sometime in 2025. This is an analysis I run through in this week's big story. With share prices down over 70% since Grab went public via a [SPAC]( transaction, early shareholders will certainly be hoping that a steadily improving bottom line will flow through to the value of their holdings. -- Simon  ---------------------------------------------------------------  THE BIG STORY [Uber's path to profit: a road map for Grab?]( Morgan Stanley analysts expect Grab to record adjusted EBITDA of US$137 million in 2024, but that’s likely to fall short of GAAP profitability. ---------------------------------------------------------------  3 TRENDS TO KEEP EYE ON Hot stocks, earnings reports, restructuring, pressure from activist investors, and more. 1️⃣ Zomato and DoorDash deliver the bacon: Uber is not the only delivery platform to achieve profitability. India’s Zomato (ZOMATO, NSE) posted its [first-ever profit]( for its most recent quarter, one quarter earlier than expected. Shares rose by up to 3.9% following the results. This comes even as the US’ DoorDash (DASH, NYSE) [raised its adjusted EBITDA forecast]( for the second time, amid strong growth in its delivery business. Investors sent its shares up by nearly 4% at one point, although the firm ended the trading day down. What these food delivery platforms are demonstrating is that their business models are in fact sustainable, which some had doubted. But of course, the question is how much more they can grow while keeping costs in check - that will be the true determining factor of their value. 2️⃣ DBS powers ahead: Singapore’s DBS (Do5, SGX) continues to break new records. Profit for the second quarter of 2023 reached a [record high]( aided by higher interest rates and fee income. CEO Piyush Gupta noted that the bank’s “focus on digitizing, on cash management, on both the corporate and consumer side, and on wealth is really paying off.” DBS has made billions of dollars worth of digital investments in the last few years and makes for a good case study on how established incumbents can effectively meet the challenges they face from startups. Yet, with a P/E ratio of around 11 and a dividend yield of 4.6%, the bank is still very much valued like a traditional company. 3️⃣ CCP to China tech: not so fast: Investors who think the Chinese authorities are easing the pressure on tech companies amid the country’s cloudy economic prospects might want to reexamine their assumptions. China’s cyberspace regulator fired a new salvo at the industry by saying that children under 18 should only be allowed to use their smartphones for a maximum of tw0 hours a day. This regulation won’t be easy to enforce, and the difficulties of ensuring compliance surely played a part in sending shares of companies like Bilibili (9626.HK), Kuaishou (1024.HK), and Tencent (0700.HK) down by between 3% to 7%. Consumer tech in China is still in a precarious position, and the tendency of regulators to introduce such hare-brained measures certainly calls into question the investability of the sector. 2 EYE-POPPING NUMBERS Tech in Asia scours the internet to bring you head-turning numbers from the world of business. - [US$26 million]( The net loss suffered by Indonesian ecommerce player Bukalapak (BUKA, IDX) for the first six months of the year. It also reported a 29% jump in revenue offset by a 40% increase in operating costs. - [Over 10%]( The increase in Amazon’s (AMZN, NDAQ) share price in extended trading after the US ecommerce and cloud computing major announced profits that beat analyst forecasts and issued a guidance pointing to accelerating revenue growth. THE ONE YOU DIDN'T SEE COMING We spotlight the story that had everyone talking and social media buzzing during the past week. Wrong call?: Shares in telco Singtel (z74, SGX) hit a two-month low last week as analysts from Citi (C, NYSE) [flagged]( soft earnings from Telkomsel, Singtel’s regional associate in Indonesia in which it has a 30% stake. The analysts noted that Telkomsel’s net income for the second quarter of 2023 fell 21% year on year. According to Citi, that is bad news for the Singapore company because Telkomsel is estimated to generate around a quarter of Singtel’s own pre-tax profit. However, Singtel has come out to [clarify]( that the decline in Telkomsel’s net profit was driven mainly by a fair value revaluation of its investment in consumer internet company GoTo (GOTO, IDX). Excluding the change in fair value of the GoTo investment, Telkomsel’s net profit would actually have been up 1% year on year. It seems obvious that the value of GoTo’s shares would not have an impact on Telkomsel’s underlying business and ability to pay dividends to Singtel or on either telco’s underlying net profit. We haven’t sighted the actual Citi report, but if it had been released without this caveat, that really isn’t a good look. That’s it for this edition - we hope you liked it! Not your cup of tea? You can unsubscribe from this newsletter by going to our preference center at the bottom of this email. Happy investing and see you next week! Disclaimer: This content is for informational purposes only. Kindly do not construe any such information as legal, tax, investment, financial, or other advice. [ADVERTISE]( | [SUBSCRIBE]( | [HIRE]( | [FIND JOBS]( P.S. Don't miss out on the biggest tech news and analysis. Add newsletter@techinasia.com to your address book, contacts, or safe sender list. Or simply move us into your inbox. Too many emails? 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