Deep Dive Into Super Apps

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Indexes
  1. (I) Super Apps: A Comparative History
  2. (II) Our Super Apps Framework
  3. (III) GRAB: Business
  4. (IV) GRAB: Valuation
  5. (V) Conclusion
  6. (II) Super Apps Framework
  7. (V) Conclusion

We often get asked for nuanced deep dives into businesses, and a glimpse into the thinking behind the Hows and Whys of decisions.

This edition obliges, and is laid out as follows:

(I) Super Apps: A Comparative History

(II) Our Super Apps Framework

(III) GRAB: Business

(IV) GRAB: Valuation

(V) Conclusion

Usual Disclaimers Apply: This is an educational piece delving into business histories, our approach and considered opinions. We make no solicitations on the industry or the companies mentioned as investments.

The only true protection that we have when risking capital is independent judgment.

(I) Super Apps: A Comparative History

Super Apps are a young category but have a fascinating evolutionary history. Some examples include: Yandex (Russia), Kaspi (Kazakhstan), WeChat (Tencent, China), Facebook (USA), PayTM (India).

Super Apps have one True North

Create a One Platform that onboards Users, and keeps them there through various touchpoints of Engagement.

Interestingly, the road taken to this True North has been varied and offers interesting pointers on the evolutionary history of Super Apps.

Yandex began its life as a Search Engine. Over the years, it has utilized this core cash engine to drive its Super App through Delivery, Mobility, Navigation.

Kaspi, by contrast, began its life as a Bank. It then created an Apps layer that onboarded Users, and now drives Engagement through Payments, Government Services Engagement, and an E-commerce Marketplace.

WeChat began its life as a Chat App. It then built Payments and Delivery layers on top of this funnel to drive Engagement.

Facebook — even before WeChat — began as a Chat App. It then strengthened this presence with the acquisitions of WhatsApp and Instagram, building Social Media layers. The next progression for Facebook is likely Payments (it tried with Libra but failed) and Commerce (Instagram/WhatsApp Business + Logistics; currently fulfilled by Shopify).

PayTM began its life as a pre-paid Mobile recharge/bill payments platform. This route meant that PayTM had to adopt an incentivization model to keep pulling customers on its platform. PayTM then added Wallet, E-commerce and then a move into Ticketing services. This was followed by a move into Payments. PayTM’s journey (discretionary, low-value transaction engagement) imposes a constraint to continuously incentivize Users to stay on its platform.

As is evident, Super Apps have taken varied paths to their True North destinations.

(II) Super Apps Framework

To amalgamate these varied paths in one useful Mental Model, this is our Super Apps Framework to gauge the competitive strength of businesses in the space.

1. Stickiness: What truly ensures that Users stick around?

2. Incentives: What incentives are built to ensure (1)?

3. Unit Economics: What capital structure is needed to ensure (1) and (2)?

Super Apps that offers a Utility Service to Users tend to be the best placed on (1) and (2). Yandex (Search), and Kaspi (Bank) means that Users default to these Super Apps as a Natural Nudge. WeChat and Facebook has an engaged User base even though it offers a Discretionary Service (Chat platforms). In the case of Yandex and Kaspi, Users derive financial benefits (revenue driver for Users) directly by engaging with the App. This means the Super App does not need to spend repeatedly to acquire (and keep) these Users. This contrasts with the User engagement profile with PayTM, which also has a financial angle but with a crucial difference (Users seek Cost Reduction over Revenue Maximization). WeChat and Facebook built (1) through Network Effect, which then creates (2). Once onboarded, Users are tied to the platform. This puts Tencent and Facebook in an interesting position: they do not have to Spend to acquire (and keep) Users.

This framework will help grasp GRAB’s positioning as a Super App business.

(III) GRAB: Business

Sources: GRAB F-1 , 20-F filings. All figures in USD.

GRAB is Southeast Asia’s leading Super App, operating primarily across the deliveries, mobility and digital financial services sectors in 480 cities across eight countries in the region — Cambodia, Indonesia, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam. GRAB enables millions of people each day to access driver-and merchant-partners to order food or groceries, send packages, hail a ride or taxi, pay for online purchases or access services such as lending, insurance, wealth management and telemedicine. GRAB’s platform enables important high frequency hyperlocal consumer services — all through a single “everyday everything” app.

For the latest year ended Dec’21, GRAB achieved GMV (Gross Merchandise Value) of US$16 BN. It served 24 MM MTU (Monthly Transacting Users), 5 MM Driver Partners, and 4 MM Merchant Partners. GRAB did Revenue of $675 MM.

GRAB’s Business is organized across 4 main Verticals:

  1. DELIVERIES (53% of GMV, 22% of Revenue): Deliveries platform connects driver- and merchant-partners with consumers to create a local logistics platform, facilitating on-demand and scheduled delivery of a wide variety of daily necessities including in selected markets, ready-to-eat meals and groceries, as well as point-to-point package delivery.
  2. MOBILITY (17% of GMV, 68% of Revenue): Mobility connects driver-partners with consumers seeking rides across a wide variety of multi-modal mobility options including private cars, taxis, motorcycles in certain countries, and shared mobility options such as carpooling in selected markets. It also includes GrabRentals, which facilitates vehicle rental for driver-partners to allow driver-partners (with otherwise limited vehicle access) to be able to offer services through its platform.
  3. FINANCIAL SERVICES (29% of GMV, 4% of Revenue): Financial Services offerings include digital solutions offered by and with partners to address the financial needs of driver- and merchant-partners and consumers, including digital payments, lending, receivables factoring, insurance distribution and wealth management in selected markets. The Grab-Singtel consortium has been issued a digital full bank license in Singapore and is also seeking to obtain a similar license in Malaysia. The consortium has not yet obtained approval to commence business activities and has not commenced any business activities in Singapore. In Indonesia, Grab has also acquired a 16.26% equity interest in PT Bank Fama International.
  4. ENTERPRISE AND NEW INITIATIVES (1% of GMV, 6.5% of Revenue): A growing suite of enterprise offerings including GrabAds, advertising and marketing offerings. In addition, GRAB partners offer other lifestyle services to consumers through its Super App, including domestic and home services, flights, hotel bookings, subscriptions and more in certain countries.

Interestingly, Delivery accounts for the majority of GMV, but just over a fifth of revenue. By contrast, Mobility accounts for under a fifth of GMV but over two-thirds of revenue. Mobility is a more bang-for-the-buck business compared to Delivery.

GRAB: Under-the-Hood

DELIVERIES

In this vertical, GRAB serves 2 customers: 1) Merchants (revenue driver for Merchant partners), 2) Logistics (revenue driver for Logistics/Delivery partners).

The end User is a Cost Center from GRAB’s perspective today, with high top-of-the funnel value. To drive adoption, GRAB pays Users 7–8% of total GMV (Food GMV + Delivery GMV).

GRAB derives Revenue from 2 sources:

  1. Commission paid by Merchant Partner (20% of Food GMV).
  2. Commission paid by Driver Partner (5–6% of Logistics GMV).

Typical Transaction Flow and Economics

MOBILITY

Why more Stickiness = Core Competitive Edge

As Users use more than 1 service through GRAB’s platform, User Stickiness increases in a non-linear manner.

Referring back to the Super Apps Framework shared at the beginning of this piece:

More Usage → Stickiness → Incentives →improving Unit Economics.

(IV) GRAB: Valuation

A good business translates into a good investment only when acquired at an appropriate price.

This is where things get interesting.

To justify Current Market Cap, GRAB would need to deliver a minimum of $7 BN in Revenue at 20% Margin a decade from today.

How should one parse this $7 BN required revenue figure?

GRAB shares the GMV Market Size and its Market Share in their markets:

GRAB filings.

Delivery + Mobility GMV Market Size in 2025 = $13 BN in GMV. GRAB already does $16 BN in GMV. This means GRAB is already a significantly penetrated player in their markets (market share in Delivery and Mobility already 51%+).

GRAB’s Revenue of $675 MM on GMV of $16 BN implies a Net Take-Rate of 4.2% (Gross Take-Rate less Incentives paid out to Consumers and Partners). A decade from today, to generate $7 BN in Revenue, GRAB’s GMV would need to be around $90 BN (assuming Net Revenue Take-Rate rises to 8%, i.e., doubles from today. How? GRAB cuts Incentives as it gains scale, as it has been doing in recent years). On the other hand, if it is unable to cut burn enough, and if current Net Revenue Take-Rates persist, GRAB’s GMV would have to be north of $165 BN. The cumulative consumer spend on the entire Food Delivery & Ride Hailing categories today is $400 BN. At a 5% industry growth rate over this period, GRAB’s GMV market share would need to be in the 15–30% range 10 years from today.

Financial Services will need to play an integral role as GRAB’s GMV Growth engine. This is the reason behind GRAB applying for digital banking licenses in Singapore and Malaysia. The next step in evolution for GRAB is more Financial Services + Advertisements.

Valuation Dynamics: What does GRAB need to deliver?

Peering a little more under the hood, what would GRAB need to deliver to provide a reasonable return on its stock price from current levels?

Chart 1
Chart 1: Author Model

Chart 1: The Yellow Dotted Line shows the Current Price of GRAB stock. The X-axis shows a subset of business metrics that GRAB would need to deliver in order to generate a reasonable return from current price levels. The Blue shaded regions shows the range of Fair Value for GRAB stock under various scenarios.

To generate a reasonable return from today’s price, GRAB would need to grow revenues at a rate of at least 26% p.a. over the next 10 years, while extracting minimum Margins of 20%.

For this to be achieved, most of the below variables would have to fall in place over the next 10 years:

  • Market Growth: Southeast Asia markets to grow rapidly in Internet Adoption.
  • Company Growth: GRAB would need to continue to command a sizable market share (15–30% of Industry GMV a decade from today).
  • Super App Levers: Financial Services (scale) will inevitably need to play a greater role in GRAB’s business. Financial Services (Gross Take-Rate 2%) is a generally worse business compared to Delivery (Gross Take-Rate 18%) and Mobility (Gross Take-Rate 23%) from Unit Economics profile, as it requires own balance sheet to support Credit to customers. GRAB is not profitable today. The above imposes a requirement on GRAB to generate 20% overall margin at the minimum.
  • Geographic Reach: GRAB may have to expand into non-Southeast Asia markets.
Chart 2
Chart 2: Author Model

Chart 2: The minimum market cap where GRAB would be attractive for purchase is $6.5 BN, around -40% from current price. The maximum market cap that could be supported, but with greatly reduced probability of generating an attractive return on the purchase of the stock, is $27 BN (+162% from current price). The stock is currently priced at the 59th percentile of Fair Value range.

The peak market cap that GRAB traded upon listing in Dec’21 was $41 Bn, far above even the most optimistic valuation that could be supported by business realities. When expectations get ahead of business realities, businesses turn into bad investments.

(V) Conclusion

Super Apps are an interesting class of businesses in the Internet Economy. The evolutionary paths taken by these business are varied but all roads lead to the True North objective. Our Super Apps Framework emphasizes Stickiness of Users first, Incentive Mechanisms to drive Stickiness as the next most important vector; and finally, a close focus on Unit Economics. Over the long run, the most capital efficient players will emerge biggest winners.