CGS-CIMB Research analysts Ryan Winipta, Baruna Arkasatyo and Hadi Soegiarto are initiating coverage on GoTo Gojek Tokopedia with a “hold” recommendation, as it sees the group being “at the crossroads”.
The analysts have given the group a target price of 396 rupiah (3.7 cents), which represents an upside of 0.5% to its current share price of 394 rupiah.
The group is Indonesia’s leading ecosystem with a high volume of use cases. The group handles some 70% of Indonesia’s household consumption through its three business segments, which are on-demand services, e-commerce and financial services.
GoTo went public in April.
To the analysts, GoTo’s “value-creation from cross-platform synergies, along with further cross-pollination between “pillars” (segments) should unlock higher lifetime value (LTV), and enhance user stickiness within the ecosystem in the long term”.
“However, we expect investors to shift their focus towards execution and the rollout of several initiatives (i.e. buy now pay later or BNPL, quick-commerce) which could lead to cross-platform synergies, while external factors (i.e. competitive intensity) play a major role on the monetisation front,” they add.
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In their report dated June 27, the analysts are expecting GoTo’s profitability to arrive earlier than expected, with net revenue outpacing gross revenue growth by the 2HFY2022.
“We found that food delivery unit-economics remain a big question in the longer run, while e-commerce’s path to profitability should be relatively easier,” they write.
“In our view, GoTo could benefit from cross-platform synergies with Gojek through its quick-commerce initiative,” they add.
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That said, the positives are likely priced into GoTo’s current share price.
“We believe GoTo’s significantly higher index weighting in [the] Jakarta Composite Index (JCI) has partially contributed to its valuation premium over regional/global tech peers,” the analysts say.
“With the lock-up period set to expire by Nov 30 for the majority of its A-shareholders, we are cautious on the possibility of a valuation de-rating,” they add, noting that execution is “key” to GoTo’s cross-pollination thesis even if it has lagged behind its peers, particularly in financial services.
“Pending further clarity on execution, in addition to lofty valuations and positive post-IPO share price performance (best performing tech company globally), we believe the positives are largely in the price,” they continue.
In their view, a better-than-expected execution in its business segments is an upside risk, while the reverse is also true. At the same time, easing or intensifying competition and the limited or a higher number of shares sold once the lock-up period ends could determine the direction of GoTo’s share price.
As at 9.48am, shares in GoTo are trading at 394 rupiah, or an FY2022 P/B of 3.99x.
