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Indonesia's ride-hailing-to-fintech platform PT GoTo Gojek Tokopedia Tbk will need to tap the synergies between its disparate business lines for growth after its bold decision to go public amid global market volatility.
"Whether GoTo can succeed against its competitors depends on how well it finds synergies across its ride-hailing, e-commerce and financial services arms," said Oi-Yee Choo, CEO of ADDX, a Singapore-based digital securities exchange.
The merger of Indonesia's major ride-hailing platform Gojek and e-commerce giant PT Tokopedia was premised on the value proposition of combining three businesses under a single company. After the merger in May 2021, GoTo defined itself as a company with three units: GoJek, Tokopedia and GoTo Financial.
If GoTo's business units are able to tap resources and opportunities across the group through cross-marketing, data sharing and value-added services, "it will become a formidable player," Choo said, adding: "This is a complex but achievable goal."
Growing market
Indonesia's economy is rebounding, in part due to growing domestic demand in consumption and investment. The nation's central bank expects its gross domestic product to grow by 4.7%-5.5% in 2022, accelerating from a 3.69% expansion in 2021. The global economy, in contrast, is likely to slow, dragged by rising price pressures, uncertainties around geopolitics and rising COVID-19 infections in some countries. That has increased volatility in the global markets.
"GoTo's decision not to delay its IPO amid volatile market conditions and the global tech sell-off is a bold one," said Choo. "As Indonesia's dominant consumer brand, GoTo is in a strong position."
Still, the company faces stiff competition in each of its business lines.
For e-commerce, Tokopedia's main rival is Sea Ltd.'s Shopee, said Harry Su, head of equity capital markets at Samuel International, an Indonesian investment bank. Alibaba Group Holding Ltd.-owned Lazada South East Asia Pte. Ltd. is also a formidable competitor.
After the IPO, Tokopedia can improve profitability "by providing more comprehensive services to users in the hope of outpacing Shopee," Su said. Shopee is backed by Sea, whose profitable online gaming business Garena allows the group to give a longer runway to the online retail unit.
Gojek has faced competition from Grab Holdings Ltd., its Singapore rival, not just in the local market but also around Southeast Asia.
Leveraging synergies
GoTo Financial has a 22.16% stake in PT Bank Jago Tbk, a digital bank, and synergies will allow it to be more competitive against the likes of Shopeepay and Grab's payment platform OVO, Su said.
According to the IPO prospectus, 30% of the proceeds each will go to the group and Tokopedia, and 25% will go to GoPay. Tokopedia and GoTo Financial — GoPay and GoFinance — are the most significant contributors to the company's gross transaction value, Su said, noting that Tokopedia contributed 47.9% on average, and GoTo Financial contributed 36.2%.
The business-to-business element of GoTo Financial has the highest potential to generate profits, taking into account the solutions it offers to small to medium-sized enterprises.
The consumer business often has low customer loyalty, analysts said, making it hard for GoTo to dominate the market for long.
"The overall [consumer] stickiness is just not there across Southeast Asia," said Kristine Lau, associate at ThirdBridge, a research firm.
However, the services GoTo provides to SMEs may become a profitability driver without the heavy costs of customer acquisition.
Payment gateways operated by GoTo such as Midtrans and Moka are "the most interesting pieces of this IPO," Lau said. Midtrans is an online payment solution for enterprises, and Moka is a point-of-sale system. Such services allow GoTo to be at multiple touch points, which could lead to a larger volume of data that the company could leverage for growth.
"I think this is a big point of differentiation, even though it might not be a big revenue driver in the short term," Lau said.
GoTo started trading April 11 on the Indonesian stock exchange after it raise $1.1 billion from its listing, making it the third-largest IPO of all time in the country, according to S&P Global Market Intelligence data.
