Technology

3Q24 Preview: GOTO Poised for EBITDA Growth; Temu facing an uphill battle to enter Indonesia

 

  • GOTO poised for 3Q24 EBITDA growth driven by resilient ODS, loan balance expansion, improving CM and stable recurring costs.
  • Temu’s model may face regulatory scrutiny before it partners with BUKA and may experience an uphill battle as late entrant in the market.
  • Maintain sector OW, we prefer GOTO, TP: Rp90, implies 5.6x P/S and 6.8x EV/S, as it forms potentially one of the best alliances in the market.

 

GOTO poised for strong 3Q24 EBITDA +ve with ODS and loan growth

GOTO’s 3Q24 performance is poised for growth, with GTV expected to rise <5% qoq, ODS seeing double-digit growth, and fintech growing <4% qoq. ODS take rate should remain resilient, and loan balances could rise 20%+ qoq, with fintech take rate improving by 10-15 bps. Stable variable costs should drive high mid-teen CM growth, positioning GOTO for positive 3Q24 EBITDA and strong recovery from 1H24 losses amid flat recurring costs.

 

Blibli to continue strengthening its fundamentals

We expect Blibli to optimize TPV and improve its take-rate and GP margin. Its physical stores expansion and Dekoruma acquisition should drive TPV growth. With stable OPEX, Blibli is positioned for EBITDA loss reduction in 3Q24.

 

Limited visibility in BUKA’s model; a Temu partnership will boost its outlook

While BUKA optimizes TPV for better take rates, we have limited visibility in BUKA’s EBITDA after it abandoned its FY24 guidance; hence, we only expect slight EBITDA loss improvements. News suggests that Temu is targeting BUKA for acquisition to enter Indonesia, though it faces government resistance. Temu’s strategy usually results in price undercutting by 20-30%, which pressures local manufacturers. However, Temu’s platform could stimulate investments in logistics where costs can be as high as 25% of end-product price and drive local SMEs’ digital adoption through enhanced consumer feedback. Negotiations between the government and Temu may focus on safeguarding SMEs and promoting the local value chain, in our view.

 

Temu to face an uphill battle as a late entrant in a competitive market

Temu would be a late entrant in Indonesia’s established market and would need to comply with local regulations, TKDN, and promote local goods like its peers. Temu would use its war chest to drive aggressive promotions to gain traction, but also would enhance its logistics, cut out middlemen, and empower local suppliers. These initiatives would take time to implement. In the meantime, we expect TikTok to focus on driving synergies with GOTO, boosting GTV with enhanced marketing, last-mile delivery for local life services, and paylater solutions, thereby solidifying their market presence.

 

Maintain Sector OW with rerating opportunities; GOTO remains our top pick

The Indonesian market continues to attract foreign players due to its significant growth upsides. As we noted in our 2024 Sector Outlook, we expect the government to prioritize partnerships with local players. We prefer GOTO, maintaining a Buy rating with a DCF-based TP: Rp90, implying 5.6x P/S and 6.8x EV/S. GOTO trades at a premium compared to peers like SEA and GRAB, its strong alliance with TikTok in Indonesia—the largest ASEAN market—positions it to capitalize on growth opportunities. The key downside risk remains ineffective government policies.

 

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