The Benchmark In Digital Banking Industry
Digital makes a rapid growth
• ARTO is a mover of Indonesia digital banking industry. The company kick started a fully digital services in December 2020 after its recent partnership with the country’s digital payment group Gojek.
• Since ARTO launched Bank JAGO apps in April 2, 2021, the total installation of this apps reached more than 750k with 500k registered users, over than 130k already fully KYC-ed bank customers, with a total of IDR250bn in funding balance as of June-21.
• ARTO has eyes on millennials customers, whereas Indonesia has around 110mn of youth population. This can potentially increase company’s product penetration that provides millennials banking needs such as digital saver, split bill, and etc.
• We see that ARTO could possibly improve their financial performance in FY21E, supported by the collaboration with Gojek ecosystem which is increasing the chance of ARTO’s digital banking services inclusion by more than 11mn of GoTo’s UMKM partners. ARTO also has team up with strategic partners such as Akseleran, BFI Finance, Logisly, Adakami and several others in terms of partnership lending.
• ARTO is currently trading at +1 STD (5-years average) with 30.64x PBV.
Indonesia Digital Banking Outlook
• Indonesia is also the largest (USD54 billion) and fastest growing internet economy in Southeast Asia, with estimated internet economy reaching USD174 billion by 2025E at a CAGR rate of over 40%, based on Google–Temasek research.
•The full time equivalent (FTE) approach reveals that 30 top processes in banking use 50% of their cost, 20% of processes in banking services can be digitized and potentially can increase efficiency of 15%-20% from the total costs. (McKinsey & Company research)
• Indonesia has 51% unbanked population. Through technology, banking in the future will be focusing on: 1) invisible customer experience; 2) personalized banking; 3) maximizing data capacity; 4) product differentiation.
Valuation and Recommendation: NOT RATED
We see that ARTO could possibly improve their financial performance in FY21E. This has been made possible through the collaboration with Gojek ecosystem which is increasing the chance of ARTO’s digital banking services inclusion by more than 11 millions of GoTo’s UMKM partners. ARTO is currently trading at +1 STD (5-years average) with 30.64x PBV.
Disclaimer
