GoTo nears net income as cost cuts, fintech bet gather steam
Investors remain cautious, with the company’s stock price down about 80% since it went public in Jakarta in 2022
[SINGAPORE] Indonesia’s Internet champion GoTo Group is getting closer to sustainable profitability, with its finance chief predicting net income in the not-too-distant future as cost cuts and new business initiatives are bearing fruit.
“We’re making very, very positive progress towards net income positive,” chief financial officer Simon Ho said in an interview on Bloomberg TV. “Clearly we don’t think it’s too far away.”
The ride-hailing and delivery provider has been steadily reducing its losses since its 2022 initial public offering (IPO), trying to prove to investors it can make money. The company has slashed jobs and shuttered business units, focusing on its core home market amid tough competition from regional market leader Grab Holdings of Singapore.
On Wednesday (Aug 13), GoTo reported its fourth consecutive quarter of adjusted profit, helped by user gains and cost reductions. Net revenue, which excludes incentives to driver and merchant partners and promotions to users, climbed 23 per cent on a pro forma basis in the quarter through June.
Investors remain cautious, with GoTo’s shares closing at 62 rupiah per share on Thursday and down more than 80 per cent since the IPO.
In a move that would upend the regional market, Grab has been weighing a takeover of GoTo at a valuation of more than US$7 billion, Bloomberg News reported. Still, Grab has played down a potential deal, saying in June it’s not in talks to buy GoTo “at this time”. Ho said on Thursday that GoTo is concentrating on growing its business. “Our focus ourselves is on organic growth,” he said. “We’re not just a ride-share on-demand services platform, we have actually a fast-growing and very successful fintech business integrated as well into our ecosystem.”
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Consumer payments is set to be a key growth driver for GoTo going forward, Ho said. Its digital payments arm, GoPay, has expanded 30 per cent year on year to over 20 million monthly transacting users, he said. “We expect that to continue to grow strongly,” he said. “We will then be able to cross-sell more services in our ecosystem to these users, and one of them is of course lending.”
The company’s loan book grew 90 per cent year over year in the latest period and is set to reach US$500 million by the end of the year, Ho said. “It continues to grow at a very healthy rate,” he added.
“On-demand services, which drove 70 to 80 per cent of H1 overall Ebitda (earnings before interest, taxes, depreciation and amortisation), could remain the primary profit driver as premium features that offer shorter wait times are popular among users. Fintech’s contribution to earnings should stem from ramping up short-term loans embedded in TikTok,” said Nathan Naidu, analyst for Bloomberg Intelligence.
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“The video app had 123 million monthly active Indonesian users on average in Q2, according to SensorTower, versus GoTo’s 22.4 million fintech customers. Guidance suggests that all of GoTo’s three businesses will reach break-even by year-end, nudging the firm closer to a group net profit.”
In a bid to accelerate cost savings, GoTo handed over its loss-making e-commerce unit Tokopedia to ByteDance’s TikTok in a US$1.5 billion deal. It also exited Vietnam to concentrate on achieving profitability in its core markets of Indonesia and Singapore, while pushing into growth areas such as consumer lending.
The company reaffirmed it expects to post adjusted Ebitda of as much as 1.6 trillion rupiah (S$127 million) for the full year. BLOOMBERG
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