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RHB identifies GoTo’s road to profitability in an unrated report

Khairani Afifi Noordin
·2-min read

The analysts believe GoTo would book stronger revenue in FY2023.

RHB Group Research analysts has given GoTo a fair value estimate of 125 rupiah (1.1 cents) upon taking a closer look at the largest digital ecosystem company in Indonesia in its unrated report.

The analysts note that GoTo’s offerings consist of on-demand services, e-commerce and financial technology, which in total account for 2% of Indonesia’s GDP.

As of the first nine months of 2022, GoTo’s annual transacting users totalled 67 million, boosting its gross transaction value (GTV) by 38.9% y-o-y to 451 trillion rupiah.

Contribution margin also improved to -0.7% in its 3QFY2022 from -2.2% in 1QFY2022. Therefore, the analysts believe that GoTo is able to meet its 4QFY2022 target of -0.5%-0.6%.

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The recent amendment in Indonesian government’s regulation to decrease ride hailing apps’ commission percentage to a maximum of 15% is dampening GoTo’s on-demand segment take rate, the analysts say. However, the government have also increased the ceiling of its rates by 6%-13%, which should partly offset the lower commission fees.

Backed by growing demand, GoTo’s gross revenue from ride-hailing should still show stable growth in 2023, the analysts add.

Meanwhile, as at Jan 2, GoTo’s e-commerce division Tokopedia had raised its commission fee, up by 50% to 108% y-o-y. The analysts believe this change should not significantly impact merchants’ stickiness, as major competitors such as Shopee also have to comply with the same government policy.

Therefore, the RHB analysts expect the group’s take rate to rise in 2023, given that its e-commerce GTV contributes 39.7% of total GTV versus its on-demand services’ 8.9%.

GoTo recorded a cash burn of 3.96 trillion rupiah as of 3QFY2022, while its cash balance stood at 31.6 trillion rupiah. The analysts believe its cash balance should still be sufficient to finance its cash burn for the next two years, assuming that the burn rate does not change.

“However, we expect GoTo’s profitability to improve on the back of the higher take rate contributed by the e-commerce segment, lower promotion costs, and better opex. As such, we think it would not be necessary for the group to undergo another round of fundraising,” they add.

GoTo is currently trading at 5.79x FY2023 EV/sales, which is at an 80.5% premium to its peer average. RHB’s fair value estimate of 125 rupiah is based on 6x FY2023 EV/sales. The analysts believe GoTo would book stronger revenue in FY2023 which should shave down its EV/ebitda.

As at 3.53pm Singapore time, shares in GoTo are trading 4 rupiah higher or 3.33% up at 124 rupiah.

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