Brokers’ take: CGS-CIMB upbeat on Indonesia’s GoTo; initiates with ‘Hold’ at Rp396 target
Yong Hui Ting
CGS-CIMB has initiated coverage on Indonesia’s biggest tech firm GoTo with “Hold” and a target price of Rp396 (S$0.037) on expectations that the cooperative efforts on its 3 business fronts will “unlock higher lifetime value”, said the brokerage in a report released on Tuesday (Jun 28).
The target price of rp 396 represents an upside of about 2.1 per cent from the counter’s trading price as at 10.32am on Tuesday. GoTo’s shares were down 1.5 per cent or rp 6 at the time.
The tech giant’s business is spread mainly across 3 fronts, including on-demand services, e-commerce, and financial services. The company is a relatively new name on Indonesia’ stock exchange, having listed just 2 months ago on Apr 11.
Given that the firm already handles an estimated 70 per cent of Indonesia’s household consumption, CGS-CIMB analysts were upbeat on the company’s potential in unlocking higher lifetime value and enhancing user stickiness in the long term.
The analysts were also optimistic on higher profits from GoTo’s e-commerce, noting that the company could well benefit from “cross-platform synergies with Gojek through its quick commerce initiative”.
“Our discussion with management has hinted that net revenue may outpace gross revenue growth by 2H22F,” said the CGS-CIMB analysts.
However, the brokerage was also wary of downside risks in the near future. They were less certain on the food delivery unit-economics in the long run and cautioned investors against the possibility of a valuation de-rating when the lock-up period for the majority of its A-shareholders expires by Nov 30 this year.
The tech firm also appears to be lagging behind its peers in execution, particularly on its financial service offerings, said the analysts, thus concluding that the positives for the stock have already been priced in.
CGS-CIMB believes investors could further look towards GoTo’s measures towards accelerating profitability as well as its execution of new initiatives, given that the stock has performed well against its global and regional peers year-to-date.
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