Grab - A Monopoly with Widening Moats and Clear Growth Runway
24x FCF, 15%+ next 5-10 year growth, expanding margins, net cash, owner-operator, mediocre competition.
Hi, I am Trung. I deep-dive into market leaders that passed my sleep-well checklist. I follow up on their performance with my Thesis Tracker updates, and when the right price comes, I buy them for the Sleep Well Portfolio, which I am building for my daughters to redeem in 2037. I disclose my reasoning for all BUY and SELL (ideally never). Access all content here.
Hi friends,
Enjoy the 17th Sleep Well pick - Grab (GRAB).
This business will enter my Sleep Well Portfolio, where 8 out of 9 ownerships are in the money (33% average return).
monopoly-like business
15%+ growth for the next decade
scale and switching costs advantage
weak local competitors
The market expects just 4% CAGR free cash flow growth for the next decade, compared to an achievable 15% CAGR. I also like that the business has a negative working capital business model (Scott Fraser’s favorite) and ample excess cash, and the company is starting to buy back stocks, all indicating an attractive opportunity to build a position.
On a personal note, my daughter is now home after 5 weeks in the hospital. Things are on the up as she learns to walk again soon. While I was in the hospital with her, I have written the following, in case you missed them:
Southeast Asia's dominant ride-hailing, food, and grocery delivery app is Grab (Ticker: GRAB, market cap $16B, enterprise value $12B). Its expansion to fintech, insurance, health, and travel booking solutions, to name a few, has made Grab a super app, like WeChat in China.
Although it was unprofitable from its founding until FY2023, co-founders Anthony Tan (CEO) and Hooi Ling Tan’s resourcefulness and resilience impressed me enough to research further. Grab could displace one of the existing positions in the Sleep Well Portfolio.
Grab has a marketplace business model similar to Sea Limited [deep dive, buy alert, latest update] and Mercardo Libre [deep dive, buy alert]; thus, the background knowledge of the network effects, market dynamics, and moats is well-covered. I will focus on Grab’s execution, competition, and expansion opportunities here.
Why Grab impressed me?
Exceptional execution
Beating the best
Monopoly market share
Enduring moats
Super App potential
Valuation
Risks
Sleep Well Scorecard
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