Brokers’ take: Macquarie initiates GoTo at ‘Outperform’ with over 20% upside
Wong Pei Ting
MACQUARIE has initiated coverage on Indonesia’s biggest tech firm GoTo Gojek Tokopedia (GoTo), believing that the Indonesia-listed stock will outperform with an upside of more than 20 per cent on monetisation and cost cuts.
In a report published on Wednesday (Sep 21), analysts Ari Jahja and Akshay Sugandi set a 324 Indonesian rupiah target price for GoTo, pointing out that growth execution, cost cuts and fundraising progress will be key to the stock’s re-rating.
Negative sentiment may have been partially priced in for GoTo, which closed at 264 rupiah on Thursday, given its significant underperformance since going public, the analysts pointed out.
The 324 rupiah target price implies a 2024 enterprise value to revenue multiple of 16.2 times, or 9 times gross revenue.
Elaborating, the analysts said they like GoTo’s core focus on Indonesia’s large digital market and its integrated model, noting that e-commerce company Tokopedia, which merged with Gojek in May 2021, has a large product solution with over 865 million stock-keeping units.
They also said they expect robust growth for GoTo’s financial services arm, given the captive high-frequency use cases and higher ‘buy now, pay later’ penetration off a low base.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
“We anticipate solid revenue growth with rising take rate as an important driver (from 3.7 per cent pro forma in 2021 to 4.3 per cent by 2025), which we attribute to monetisation initiatives, such as value-added services and new products,” they said.
There are also “ample” cost-cutting opportunities, which can drive margin improvement, the analysts noted, pointing out that GoTo will gain from ecosystem synergies and economies of scale with Tokopedia’s integration.
They are also of the opinion that GoTo could achieve positive contribution margin by 2024 and positive adjusted earnings before interest, taxes, depreciation, and amortisation (EBITDA) by 2027 as they expect topline expansion and more moderate incentive spending.
“Overall, our estimates are more conservative than consensus, possibly due to more moderate gross transaction value uptick.”
While pointing out that execution will be a key catalyst, they said certain risks remain, citing lower-than-expected growth, macro slowdown and fundraising delays as among factors.
Copyright SPH Media. All rights reserved.
