GoTo (GOTO IJ)

GTV to step-up, Gojek + Tokped upside revisited

Crunching the latest GOTO’s disclosures, we see GTV can step up and contribute to the needed short-term EBITDA improvement. GOTO best bets lie in its Gojek product differentiations and GOPAY proposition for stickiness and customer acquisition. The new CEO is pragmatic aiming to improve company robustness. Consequently, Gojek + Tokopedia merger upside is revisited visualizing a leaner tech structure. We revised our 2H23 numbers conservatively, with breakeven EBITDA borderline seen in 1Q24 at best.

Good grip on customer base, higher GTL penetration is doable. GOTO has good grip over its customer base, despite the declining incentives cost (in absolute value). The new CEO introduces the term budget customers which we believe lies at the core to GOTO’s future strategy. Meanwhile, GOTO Logistics (GTL) aims to increase penetration into Tokopedia deliveries, thus we expect quarterly incentives to be levelled with 2Q23. GTL disrupts 3PL logistics by adding the next day delivery option. Based on channel check, the GTL next day delivery is indeed cheaper vs. 3PL players but it is not available for majority of merchants we tried in our app, thus there is still runway from upside on incentives. The new CEO is pragmatic on the market landscape/trends and faster execution is his top priority in the absence of spare cash-burn / liquidity.

Looking for growth in 2H23 through budget customers and fintech. Going forward, GOTO incentives will likely stay flattish on qoq basis (despite GTL efforts) as the sector overall aims for growth, each one protecting their share in incremental GTV. GOTO already applies a new scheme of incentives (based on latest channel check, incl. reduction in flat rate), and potentially competitive take rates to both merchants (proable upside is through marketing only) and to customers. GTV catalysts for 2H23 growth are identified in: a) Consumers responsiveness to the Hemat product lines, b) Optimizing GOPAY to spearhead new consumer acquisitions c) larger no. of productive days in 2H23.  GTV can grow back up again to Rp150tn+ in 3Q23 with the view for 2023 GTV to reach the 2022 level. The potential GTV recovery and flattish take rate will allow net revenue grow further in 2H23, at potentially 2-digit rate FY23 yoy. Risks come from peers renewed product investments alluded earlier this week. 

GOTO still searches for the optimal cost structure. 2Q23 adj. EBITDA stands at Rp1.21tn with most cost-cutting resulted from the marketing side and through personnel cost. The G&A costs appear rigid, thus in the short-term 2H23, GTV growth would have to contribute in the incremental EBITDA.

Gojek + Tokopedia merger upside is revisited. New CEO’s 1^st earnings call offered clarity but left us with a big outstanding issue as his homework for the next earnings call. We take comfort GOTO distances itself from the livestreaming practices of peers. Eliminating the entertainment vertical is one way to simplify Gojek. But GOTO needs to stay ahead with technology including AI for consumers (Lazada has launched AI functionality).

The new CEO has the vision to derive a leaner structure based on the integration of its 2 main platforms by taking more radical measures in order for GOTO to leverage latest technology.