GOTO Gojek Tokopedia (GOTO.IJ Rp 53; BUY TP Rp 90) Diversified growth drivers to unlock potentials for further expansion in margins

Stock Code	Last Price	Change	Change %
DSSA	54,575	675	1.25%
DCII	149,625	625	0.42%
UNIC	9,475	350	3.84%
SINI	4,100	300	7.89%
RDTX	13,100	250	1.95%
INKP	6,425	175	2.80%
JSPT	5,400	175	3.35%
CUAN	11,525	150	1.32%

GOTO Gojek Tokopedia (GOTO IJ)

Diversified growth drivers to unlock potentials for further expansion in margins

We expect GOTO to leverage its cost-revamped ODS for user growth with cross-sell opportunities, leading to potential EBITDA expansion.
As Gopay has consistently led in app DLs and usage, it is well-positioned to become Tiktok’s largest provider in fintech and local life services.
We reiterate our Buy rating on attractive earnings growth outlook but with a lower TP of Rp90 (now based on DCF valuation).

ODS product line expansion to drive GTV growth and EBITDA momentum

GOTO's users grew by +26% yoy in 2Q24, driven by the reactivation of old users and the acquisition of new ones, with 25% of them opting for the Hemat option. According to GOTO, the CAC cost for the new users impacted the 2Q24 results, as reflected in a lower adj. EBITDA of Rp90bn for ODS, -46% qoq. However, mgmt. indicates that monthly EBITDA in 3Q24 has returned to 1Q24’s run-rate, suggesting progress in recouping CAC costs. Moreover, the Recurring Cost/GTV ratio fell by 50/120/17 bps yoy in GOTO, ODS, and GTF in 1H24, suggesting that these acquisitions are likely to unlock leverages.

GTF’s platform diversification: A moat for sustainable growth

GTF 2Q24 core GTV Rp56.2tr grew by 16.1% qoq/ 64.8% yoy, with total GTV, including a loan balance Rp3.5tr, or 6% of Core GTV. GOTO guides for ~20% qoq loan growth in the coming quarters, to be sourced from: a) Gojek BNPL and loans, b) consumer/business loans via Gopay app c) penetrating Tiktok and its driver’s user base at a later stage. The Gopay app has averaged ~1.8mn DLs/month in 2023-24, with 25mn active users and relatively strong usage compared to its fintech peers, leading across all of the Data.AI KPIs after DANA.

GOTO positioned for greater GTV growth and cross-selling opportunities

GOTO has shifted from its focus on achieving breakeven across three platforms, constrained by a smaller war chest versus peers, back to a growth-oriented mindset. It now aims to be the frontrunner as TikTok’s largest partner in BNPL and Local Life services (link1, link2), based on insights we gather from Data.AI. Moreover, the quadrupling of Tokopedia’s net loss in 2Q24 result suggests that investments are being made to boost Shop Tokopedia GTV, implying a larger e-commerce fee stream for GOTO.

Maintain Buy rating, but with a lower TP of Rp90.

We maintain our Buy rating on the attractive growth outlook. However, we lowered our TP to Rp90 (from Rp120 prev.), as we changed our valuation to a DCF approach (from P/S multiple prev.), assuming a 6% CAGR outlook for FY24-34 for ODS and GTF GTV. The stock also trades at -1SD of its 2.4-year mean gross revenue multiple. Key risks stem from intensified competition and possible sell from early investors.

… Read More 20240826 GOTO