GoTo, Indonesia’s Most Valuable Startup
GoTo Group is the largest digital ecosystem in Indonesia. GoTo's mission is to “drive progress” by offering technology infrastructure and solutions for everyone to access and thrive in the digital economy. The GoTo ecosystem consists of on-demand transportation services, e-commerce, food and grocery delivery, logistics and fulfillment, as well as financial and payment services through the Gojek, Tokopedia, and GoTo Financial platforms. Onwards, GoTo’s pipeline will also include GoTransit, Electric Vehicle (EV) bikes, GoShuttle, GoCorp. AdTech platform and more robust tools, thus making GoTo’s business to be appealing for investors.
The Beginning of Something Great
• GoTo prepares for IPO by issuing 52 bn of A shares which equivalent to 4.35% of the company's issued and fully paid capital. Compared to series B shares, series A shares have the same rights, except for voting rights with the ratio of voting rights of series B Shares to series A Shares is set to be 30:1. This dual-class voting structure concentrates voting rights on Series B shareholders (founders) which may limit the ability of Series A shareholders to influence the Issuer's corporate action decisions.
• GoTo sets potential final share price of IDR338 per share at IPO thus potential fund raised will be equivalent to IDR17.57 tn implying the market cap at IDR404.05 tn. The proceeds raised from the IPO will be used for working capital for the company and its subsidiaries with the allocation of the proceeds to be: 1) 30% for Gojek; 2) 30% for Tokopedia; 3) 25% for PT Dompet Anak Bangsa (GoPay); 4) 5% for PT Multifinance Anak Bangsa (part of GoFinance); 5) 5% for Velox Digital Singapore Ltd.; 6) 5% for Go Viet Ltd.
• Moreover, GoTo plans to list 10% of its total shares to foreign stock exchanges by the end of 2023, namely New York Stock Exchange (NYSE), National Association of Securities Dealers Automated Quotations (NASDAQ), Hong Kong Stock Exchange (HKSE), Singapore Stock Exchange (SGX), or London Stock Exchange (LSE). The company plans to increase its capital to a maximum of 119.5 billion series A shares in order for the listed shares to be diluted. This listing of foreign exchanges is hoped by GoTo to be able to access wider consumer base.
Assessing the Success of the IPO
GoTo weight to JCI is expected at 4%, the 5th largest after BBCA, BBRI, TLKM and BMRI under 30% free float-adjusted market cap calculation. Given the large market cap, GoTo will also drag up sectoral index weight particularly for IDXTECHNO. Under this circumstance, GoTo’s listing on domestic equity market will likely to impact on asset allocation strategy and portfolio fund flow both from domestic and foreign investors. It is also worth noting that unlike BUKA’s IPO, GoTo’s green shoe option scheme, is expected to maintain share price after listing and not fall below the IPO’s price for at least in a 30 days period. We believe this would be a positive catalyst for the share price in a short-term period, while in the long run, it has different backdrop story as investors are focusing on turnaround story as well as prospect and valuation.
Challenging Momentum of the Dual Listing Plan
GoTo’s dual listing plan faces challenges from volatile market condition. The Fed aggressive move to raise interest rate has sparked the riskier asset sell off including tech stocks and digital assets such as cryptocurrencies. Albeit the already priced in Fed’s move in Mar-22 and in FY22, Nasdaq Composite is still down -11.19% year to date. In addition, the top 10 biggest tech-stock IPO (either through direct listing or SPAC) disappointing performance brings another challenge. The top-10 biggest tech IPOs have raised nearly USD42 bn in combination since 2021. However, those stocks were down more than half of its value since the debut. We understand that loss booking earnings as well as stretched valuation characteristics make them more likely to become the long duration asset which we believe to be more sensitive to interest rate hike. Therefore, this may justify sell off and share price drop as investors try to shorten their portfolio duration during the tightening cycle.
Waiting for the Turnaround Story
• We do believe that GoTo business focus mainly on 3 segments which are 1) on demand services, 2) e-commerce and 3) fintech open up possibilities for huge monetization. After consolidating Tokopedia as the e-commerce arm, GoTo GTV grew +34.9% YoY in 9M21 to IDR324.9 tn. E-commerce segment as the largest contributor which accounted for 51.6% total GTV rose +48.7% YoY followed by Fintech segment contributing to 43.7% total GTV which recorded a growth of +76.6% YoY. GoTo’s gross revenue increased +38.5% YoY to IDR11.8tn in 9M21 on the back of significantly higher e-commerce transaction.
• For GoTo, ecosystem integration and monetization as well as operational efficiency is the key strategy to focus on in building turnaround story towards profitability. Note that in 7M21, GoTo’s SG&A was 2.78x from its revenue. The nature of industry tight competition in e-commerce, on demand service as well as in fintech also trigger higher budget for marketing & selling expense as well as investment in talent to bring innovation and strengthening position in the market as competitors have become more aggressive in building their digital ecosystem.
• In terms of valuation, GoTo is offered at 18.4x-20.2x P/S FY22E on the back of 30% 5-years CAGR, a more premium compared to global peers having mean and median P/S in 4.3x and 3.3x. Meanwhile based on the conservative rising of GTV, GoTo is offered at the mean level ~0.7x P/GTV, compared to the global peers at 0.6x-0.8x P/GTV in FY22E.
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