GoTo Gojek Tokopedia (GOTO.IJ IDR 86 BUY.TP IDR 98) Securing a stronger position in e-commerce

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GoTo Gojek Tokopedia (GOTO IJ)

Securing a stronger position in e-commerce

The deal with Tiktok entails an injection of US$1.5bn into Tokopedia for a 75.01% stake, allowing GOTO to continue monetizing in 3 corridors.
GOTO’s 24.99% share in Tokopedia will be indirectly funded, keeping the stake unchanged in the event of future additional investments.
We believe future upside should more than compensate for the implied valuation shortfall; maintain Buy with an unchanged TP of Rp98.

Deal structure in two parts. First, GOTO relinquishes a 75.01% stake and the control of the enlarged Tokopedia at a US$2bn valuation (vs. our current US$2.4bn valuation for Tokped pre-deal). Second, GOTO secures future revenue streams as a minority shareholder of 24.99% in the form of: a) income from associates and potentially dividends, b) agreed revenues stream as a form of take-rate on TTS/Tokped GTV in perpetuity based on a formula, and c) upside to GOTO’s ecosystem from TTS/Tokped traffic by being the preferred partner.

Open-ended investment in Tokopedia funded by Bytedance. The key aspect in the first part is that GOTO will hold 24.99% in Tokopedia in perpetuity, suggesting that GOTO will be the beneficiary of any future funding by Tiktok (or other 3rd party, as assured in our call with the management). This implies that GOTO will be funded indirectly to maintain the investment in Tokped and share the same commitment with Tiktok to drive GTV. During the management call, GOTO highlighted the Indonesian outlook for GTV of US$82bn in 2025F and US$160bn in 2030, per GTBc’s projection. Regardless of the future market size, GOTO is guaranteed a 24.99% share of earnings upside in TTS/Tokped.

A stronger partner for Tokped, upside for GOTO. Overall, we are positive on the deal as it positions Tokped as a better challenger, as e-commerce players’ pursuit of higher GTV still requires significant efforts (Lazada recently also secured another US$645mn injection, the 3rd injection in 2023). Meanwhile, the deal shall also allow GOTO to focus on the ODS and fintech business monetization with expansion to budget consumers and financial inclusion.

Maintain Buy rating on future upside. Despite the lower-than-expected deal valuation for Tokopedia (implying 28% downside to our SOTP), we believe this will be offset by potential upside in GTV in the enlarged Tokopedia with capacity to burn significantly more than Tokopedia standalone. That should feed to the revenue streams of GOTO, entitled to a certain percentage of TTS/Tokped GTV. We maintain our recommendation with an unchanged SOTP-based TP of Rp98 for now. Key risks may stem from regulation scrutiny bringing obstacles to the deal.