GoTo harps on growth, profitability but fails to talk up stock

Indonesian technology giant GoTo’s stock price continued its downhill journey despite the company reiterating its focus on growth and profitability at a public conference on Thursday.

According to Indonesian Stock Exchange (IDX) data, GoTo’s stock closed at 100 rupiah apiece on Thursday, down 6.54% from 107 rupiah apiece on Wednesday. The stock has been on a free fall since the lock-up period on its shares expired on Nov 30, 2022. The stock was at 151 rupiah apiece at that time.

Patrick Chao, GoTo’s President, said the stock price volatility is due to many factors, including macroeconomic and capital market conditions, competition, and the company’s performance. “With the lock-up period expiry, pre-IPO investors have realised their gains. Moreover, the end investment period for financial institutions and necessity of year-ender liquidity, which are beyond our control, have affected the stock price,” he said at the conference.

However, Chao assured that GoTo’s performance is on the right track, with a focus on product innovation within GoTo’s ecosystem and cutting expenses. 

Jacky Lo, GoTo’s Group Chief Financial Officer, said the company has improved contribution margin and adjusted EBITDA, with the on-demand services segment reaching contribution margin positive in Jan-Sept 2022, earlier than expected. “We are committed to continuing this positive trend through continuous high-quality business growth and an ongoing focus on efficiency, to further accelerate our path towards profitability,” he added.

The company also elaborated on its strategy to spur growth through product-led innovation. GoPay Coins, GoTo Plus, GoPay Later Cicil, GoFood Hemat, and Go Transit have further deepened GoTo’s ecosystem synergies, according to director Hans Patuwo.

With this strategy, GoTo expects to to achieve a few targets for the full-year 2022, including a gross transaction volume (GTV) of 613-619 trillion rupiah and gross revenue of 22.6-23 trillion rupiah.

Meanwhile, during the Jan-Sept period, the company’s GTV increased to 451.47 trillion rupiah from 324.94 trillion rupiah in the same period a year earlier, while gross revenue reached 16.63 rupiah from 11.71 trillion rupiah.

Exploring multiple options

Despite the improvement in contribution margin and adjusted EBITDA, a lack of cash flow is still a concern for GoTo. DealStreetAsia reported that its cash balance as of Q3 2022 was 31.6 trillion rupiah ($2 billion), nearly the same as it was prior to its listing in April 2022. At the current burn rate, this would last exactly two years, according to the latest research by Clarence Chu, an equity analyst at Aequitas Research.

Lo, however, said the company’s cash balance sheet is in a healthy position due to the improvement in contribution margin and reduction in expenses. “We are very careful in managing our expenses, shown by our monthly burn rate which has reduced by 13% in Q3 to 1.3 trillion rupiah from 1.5 trillion rupiah in Q2 2022,” he said.

The company also continues to divest non-core assets and will not invest in new businesses which do not support our profitability goals, he added.

On the other hand, GoTo is exploring multiple options to increase capital, one of them being a private placement or non-pre-emptive issuance of up to 10% of total capital. The company got approval for a private placement at the shareholders’ meeting in June, and the option can be executed until June 2023.

Chao hopes that new investors will be interested in GoTo’s capital fundraising and will support its plan to join global indices in the first half of next year. 

Niko Margaronis, analyst at BRI Danareksa Sekuritas, said GoTo is capable of joining global indices, such as the MSCI Indonesia Index. The index is a benchmark for large and mid-cap companies in Indonesia looking to attract global investors.

The requirements for listing on the index include having a free float of 56.8% of JCI, high daily volume, and at least a year of being listed in the market. Looking at the requirements, Margaronis said GoTo will join the index. “By joining the global indices, GoTo’s stock will be more liquid, more people will invest, and fund managers should buy it to balance their fund allocation,” he said.

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