Analysts maintain 'buy' on GoTo despite higher-than-expected 4QFY2022 net loss

GoTo expects cash burn to be reduced by about 65% this year, while positive cash flow is expected in the early part of 2024.

Analysts have maintained their “buy” calls on GoTo following the Southeast Asian internet giant’s 4QFY2022 results ended December announcement.

Deutsche Bank Research analyst Reena Verma Bhasin notes that GoTo’s 4QFY2022 net loss of IDR19.5 trillion was larger than street forecasts.

This was on the back of sharp write-down in goodwill from the Tokopedia merger, an investment write-off in JD.id which shut down its Indonesia operations, as well as accelerated recognition of share-based employee compensation.

Excluding these, the 4QFY2022 net loss would be about IDR6.5 trillion, an improvement of 36% y-o-y and 3% q-o-q. “We believe the largest hit — goodwill impairment — captures sharp volatility in pre and post-merger valuations and is unlikely to repeat unless the share price materially breaches 2022 lows,” says Bhasin.

UOB Kay Hian analyst Stevanus Juanda, who has a IDR190 target price on GoTo notes that the firm’s operational performance has continued to improve in 4QFY2022. GoTo’s adjusted ebitda narrowed to IDR3.1 trillion for the period, compared to a loss of IDR6.5 trillion in 4QFY2021.

Ebitda loss as percentage of gross revenue improved from -122% in 4QFY2021 to -50% in 4QFY2022. For 2022, adjusted ebitda came in at IDR16 trillion loss compared with the IDR16.5 trillion loss in 2021.

Moving forward, investors should focus on GoTo’s 1QFY2023 number which will be reported at the end of next month, says Citi Research analyst Ferry Wong says. Maintaining his target price at IDR250, Wong expects better efficiency coming from the cost redundancy exercise GoTo had undertaken in November.

“We expect the take rate to improve considerably in 1QFY2023 aside from GoTo reaching contribution margin positive with a better adjusted ebitda number. The company provides adjusted ebitda guidance of -IDR4.6 trillion to -IDR5.3 trillion, which is in line with our adjusted ebitda guidance of -IDR4.7 trillion in FY2023 and IDR4.7 trillion in FY2024,” he adds.

Jefferies analysts Thomas Chong, Melody Chan and Zoey Zong highlight GoTo’s reaffirmation for overall adjusted ebitda to turn positive in 4QFY2023. GoTo expects cash burn to be reduced by about 65% this year, while positive cash flow is expected in the early part of 2024.

“[GoTo] has sufficient cash to execute its business plan. In 1HFY2023, it is focusing on profitability and will not expand into other international markets aggressively. Product-led, instead of incentive-led model, is pursued with emphasis on hyperlocal strategies,” they add. The Jefferies analysts have kept their target price at IDR182.

In its commentary, GoTo suggests that its on-demand growth may remain tepid as post-Covid 19 reopening is dragging its food delivery business. Hence, Bhasin is factoring single-digit on-demand gross transaction volume growth for FY2023 and lower longer-term forecast to about 15% from 20% previously. This leads to a 12% cut in her target price to IDR150.

As at 1.55pm Singapore time, shares in GoTo are trading IDR3 lower or 2.59% down at IDR113.

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