Bank of America (BoFA) Securities has initiated “neutral” on GoTo with a target price of IDR125 as its risk-reward is balanced, according to analysts Sachin Salgaonkar, Sukriti Bansal and Shalav Saket.
In their July 3 report, the analysts consider GoTo’s position in the Indonesia market as strong, citing it as one of the beneficiaries of the digitalisation boom.
In the near term of the next six to eight months, the analysts estimate GoTo’s gross transactional value (GTV) growth in both on-demand and e-commerce to be soft, led by normalisation.
BoFA forecast the company’s FY2023 on-demand and e-commerce GTV to shrink by 6% and 8% respectively. For FY2024, the analysts expect GTV growth of 12%/15% for the two segments.
“In our view, GoTo’s focus on path to profitability could lead to negative GTV growth in near-term for its on-demand and e-commerce verticals. However, we see room for take-rates to improve, leading to an overall healthy revenue growth in FY2023,” they add.
In terms of competition, the analysts find the competitive intensity in Southeast Asia to be lower compared to that in India and China. Given the large total addressable market, BoFA sees room for GoTo, Grab and Sea to co-exist rather than compete with each other.
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“Indeed, in the last six to nine months, we are seeing all companies raising take-rates rather than undercutting each other. Amongst the various businesses — ride hailing, food/grocery delivery, e-commerce, financial services and logistics, we find risks to competitive pressures more in e-commerce, mainly on the back of TikTok’s aggression,” they point out.
As Tokopedia has better exposure to the middle-to-high income population, BoFA believes the company is more resilient to reduction in consumption spending and relatively less vulnerable to TikTok. Nevertheless, the analysts expect market share decline pressure to remain, given current high market share.
Tokopedia has about 70% of its gross merchandise value coming from physical goods and the remaining 30% from digital goods. Out of physical goods, 60%-70% is consumer-to-consumer. Going ahead, the analysts believe the majority of the take rate increase for Tokopedia will flow through, led by increase in merchant commissions.
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BoFA expects GoTo to report ebitda and net income breakeven by 2027. Due to this, the analysts find GoTo to be fairly valued, in context of its fundamentals. GoTo is currently trading at FY2023/FY2024 EV/sales of 9x/6.4x, a premium to its peer average multiple.
As at 3.27pm, shares in GoTo are trading IDR2 lower or 1.79% down at IDR110.
