Strong Business Fundamental and Strategic Factors Become the Basis for GOTO Stock Hold Recommendations

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Faktor Fundamental dan Strategis Bisnis Kuat Jadi Dasar Rekomendasi Hold Saham GOTO

The strategy of PT GoTo Gojek Tokopedia Tbk ( GOTO ) to implement various hyperlocal initiatives and cross-selling is the basis for analysts' belief in recommending investors to hold GOTO shares with a target price of Rp420.

PT Samuel Sekuritas Indonesia analyst Muhammad Farras Farhan in his research said that the potential growth of gross transaction value (GTV) to Rp710 trillion this year compared to the realization of Rp461 trillion in the previous year, mainly due to the implementation of hyperlocal and cross-pollination that are increasingly optimal. , so that it can be the key to performance growth for the long term.

The hyperlocal strategy, especially in the logistics aspect, is part of the strength of the GoTo ecosystem which makes the flow of goods and services delivery more effective and efficient. Meanwhile , cross-pollination or synergy between platforms will optimize the entire digital ecosystem in the GoTo group.

Currently, GoTo runs three business pillars simultaneously consisting of on-demand services through Gojek, e-commerce through Tokopedia, and financial technology through GoTo Financial.

These three are GOTO's fundamental strengths that make the GOTO ecosystem the most complete compared to its competitors.

With the potential for an increase in transaction value, it will encourage an increase in GOTO's revenue this year. "We estimate that GOTO's net income will reach Rp7.6 trillion in 2022. It will grow by 67% year on year (YoY)," said Farras quoted on Tuesday (19/7).

So this research recommends holding GOTO shares with a target price of IDR 420 per share.

GOTO's performance growth is not only projected to occur this year, but consistently in the long term.

"We project that the GOTO business will grow with compound growth of more than 20% over the next five years, supported by the rapid growth of the internet ecosystem and GOTO user base," he continued.

Referring to a report released by Google, Temasek, and Bain, from early 2020 to mid-2021, internet users in Indonesia increased by 21 million. Around 72% of these new users come from rural areas which shows the wider reach of internet services in Indonesia.

In 2021, around 201 million people in Indonesia have used the internet, and this figure is projected to reach 233 million by 2025. The growth of internet users has driven the value of digital economy transactions in Indonesia.

Based on the same research data, the Gross Merchandise Value (GMV) of Indonesia's internet economy has reached US$ 70 billion (up 49% YoY) in 2021 and is projected to reach US$ 146 billion in 2025 (CAGR: +20%).

Along with that, Farras' user base is also expected to continue to increase. Moreover, all of GOTO's main business segments, be it on-demand , e-commerce, or fintech, are relatively young industries in Indonesia, so there is still room for growth.

According to RedSeer, in 2021, e-commerce will only account for 8.7% of Indonesia's total retail sales. The same is true for on-demand (with a penetration rate of 8.3%), and mobility (5.2%). "These figures illustrate the huge growth space for these industries," he said.

RedSeer also projects that GOTO can record growth in its reachable market share (TAM) of 20% to 36% in 2021 – 2025.

Coupled with the strength of the GOTO ecosystem, which is more complete and superior to its two main competitors, namely SEA Ltd and Grab. “SEA Ltd does not have on-demand services, while Grab does not have e-commerce,” said Farras.

In the future, GOTO's fintech business line is projected to grow and contribute more to GOTO's growth. GoTo Financial itself has several businesses which are divided into four categories; consumer payments, merchant payments, merchant solutions, and lending platforms.

GOTO provides consumer payment services run under the GoPay brand, which controls 25% market share in Indonesia and is the market leader.

For merchant payments, GoTo Financial also uses the Midtrans and IRIS brands which offer payment integration solutions for merchants.

For merchant solutions, GoTo Financial uses the GoBiz and Moka brands that offer POS ( point of sale ) services that make it easier for merchants to access digital payments from consumers.

Lastly, for lending platforms, GoTo Financial offers GoPaylater and GoModal services, which provide access to loan capital (GoModal) and buy now pay later (GoPaylater) schemes in exchange for subscription fees and interest income.