This weekly newsletter highlights top developments and trends across Southeast Asia’s digital economy and ecosystem, without losing sight of the solid links between the online and offline worlds.
Executive Summary
- Used car race hots up in Indonesia
- Ajaib widens fintech play
- Vidio dominating OTT in Indonesia
- Grab stakes its claim in digital banking
Used car race hots up in Indonesia
The digital used car race for funding is already well off the grid, with both Carsome and Carro raising big-ticket rounds and attaining unicorn valuations. Competition in the auto marketplace is intensifying with Singapore-based classifieds marketplace Carousell and OLX pushing hard into this space.
In Indonesia, there is also IDX-listed logistics player ASSA, which is about to list its own car trading business Autopedia in a local IPO.
Carro and Carsome will be putting the capital raised to good use as they deepen their regional footprint. Singapore-born Carro is looking to increase its market position in Indonesia, Thailand, Malaysia and Singapore as also broadening its financial services offerings. Carro sold around 200,000 used cars in 2021 across SE Asia.
Malaysia-based Carsome, meanwhile, is looking to accelerate its organic growth in the retail and auto-financing business, both of which require capital. Carsome opened at least seven B2C retail centres across Malaysia, Indonesia and Thailand, in 2021, with several more in the pipeline. This underlines the fact that online used car players require an offline presence to operate efficiently.
Carsome also bought a stake in Indonesian car auction company PT Universal Collection to source used cars as well as dispose of those on the books for too long. Carsome aims at 100,000 used car transactions in 2022.
Local player Autopedia, which competes directly with Carro and Carsome, bills itself as the leading integrated omnichannel marketplace in Indonesia. Its offline infrastructure and the car auction business – with a 40% market share selling 120,000 four-wheelers and two-wheelers annually – are seen as huge advantages working in favour of the firm in Indonesia.
Autopedia also has a captive supply of used cars from its car leasing business under ASSA Rent, which sells around 5,000 cars a year from a total fleet size of 27,000 vehicles, as those cars are sold after four years of leasing.
Besides, it can also source used cars through its JBA Auction business through which it enjoys a deep network with thousands of dealers and major multi-finance companies. The company can tap into the auction business if vehicles are not sold through its online used car and new car site Caroline.
ASSA already has 13 auction points and 21 hubs covering 22 hectares across the country, a formidable offline presence that some of the online players have just started to build out.
At $20 billion, the Indonesian used car market is a huge opportunity to tap, leaving room for new entrants who make the process more efficient. However, it is still a relatively capital-intensive business.
Ajaib widens fintech play
Ribbit Capital-backed Indonesian online stock brokerage Ajaib Sekuritas Asia is likely to expand its offerings by launching new services such as retail bonds and underwriting this year.
Ajaib, which sells stocks and mutual funds in Indonesia, late last year acquired a 24% stake in listed Bank Bumi Arta, giving it banking exposure.
Ajaib, like other wealth tech players, will be looking to diversify revenue streams as the space gets crowded in Indonesia. Grab recently increased its stake in mutual fund platform Bareksa to expand the breadth of financial service on the platform. Other major wealth tech platforms include Bibit, Pluang, and Tanamduit.
Ajaib already has cash in its kitty to fuel its expansion plans after having grabbed $243 million in 2021 from the likes of SoftBank, Horizon Ventures, Alpha JWC, DST Global, Ribbit Capital, ICONIQ Capital, and IVP. The fintech platform earned the unicorn moniker following its $153-million fundraising in October.
Ajaib already has over 1 million investors on its platform compared to 2.7 million retail stock market investors in the whole country, with 90% being the millennial category. The number of retail investors in the Indonesian stock market has risen significantly during the pandemic from 1.6 million at the end of 2019.
Including other areas such as mutual funds, the total number of retail investors has risen to 5.4 million, representing a capital markets penetration rate of only 2%.
Ajaib Sekuritas claims to be booking more than 5 million transactions per month, with more than 30 billion shares traded during the period.
Ajaib claimed to rank as the number three broker on the Indonesian Stock Exchange last year but it does not appear in the IDX data in the top 20 in any single month, although it is obviously active from a retail perspective.
Up until October last year, retail investors accounted for 59% of stock market turnover versus only 37% in 2019 reflecting the growing popularity of investing and the availability of new channels such as Ajaib.
On the flip side, however, the lack of an understanding of stock market investing and a growing preponderance of influencers are resulting in ill-informed recommendations on individual stocks.
Public market financial literacy is still low in Indonesia at 4.9%, suggesting a significant upside to the provision of digital financial services.
Vidio dominating OTT in Indonesia
Indonesia is one country where local content is king. The free-to-air landscape is dominated by Media Nusantara Citra Media (MNCN) and Surya Citra Media (SCMA), which between them command around 75% audience share.
Over the past year, the quest for both players has been to move into the digital space. But they have taken different approaches with MNCN setting up multi-channel networks on YouTube, Facebook, and TikTok.
Rival SCMA plans to produce a significant amount of new content in 2022 for Vidio.com – 35 feature-length drama series or 450 hours of content versus 24 series in 2021. This move is seen to grow its paying subscribers and monthly active users in 2022.
In October last year, Vidio hired Monika Rudijono, who was previously head of marketing at Lazada Group in Indonesia, as managing director to drive that business forward.
The new MD is tasked with doubling the paying subscriber base to 4 million m in 2022 and pushing the content onto Facebook, Twitter, and TikTok. Vidio’s MAUs increased from 62 million in November to 65 million in December.
The recent sale of a 16.67% stake in Vidio.com to private equity investor Affinity Partners has already established a value of $750 million for the company, which is yet to reflect in the share price of SCMA.
Vidio’s strategy is to be the local OTT platform in Indonesia versus other players such as Disney+, Netflix, Viu, and WeTV (acquired iflix) that rely on foreign content and as a result, have a more finite customer base.
Grab stakes its claim in digital banking
Grab has finally staked its claim in Indonesian digital banking by taking a stake with Singtel in Bank Fama International, previously wholly-owned by Emtek Group.
Grab and Singtel have taken a 16.26% stake each for a total consideration of $70 million.
Emtek had previously acquired Bank Fama International to transform it into a digital bank and will see its stake diluted from 93% to 62.76%.
The transaction is further evidence of the close collaboration between Grab and Emtek, given the cross-shareholding between the two companies.
This is likely only the first stage in a share restructuring that will see Grab and SingTel with a controlling stake of around 60% with Emtek remaining a strategic minority investor.
Grab has confirmed that this will be its mainstay digital bank in Indonesia plugging into the platform’s ecosystem of drivers, merchants, and customers plus that of OVO, which is increasingly operating an open ecosystem.
Bank Fama is expected to start operation as a digital bank by the end of 2022 and will compete directly with Bank Jago from Gojek and SeaBank Indonesia.
Grab is developing its digital banking capabilities in SEA with SingTel as a partner in Singapore, now Indonesia, and soon to be Malaysia, for which it has applied for a license.
Earlier this month, Grab acquired a small 2% stake in Allo Bank in Indonesia but this should be seen as a strategic stake allying itself with CT Group. Grab will continue to work with multiple banks given its open ecosystem strategy.
Being a winner in digital banking is not an easy task given the different banking landscapes in each geography in the region and the intense competition in the space.
Grab’s share price performance has yet to reflect this development as it tests new lows but the sell-off is seen more to do with the overall negative sentiment toward tech stocks.
Angus Mackintosh, a consulting editor with DealStreetAsia, is responsible for the publication’s Southeast Asia digital economy weekly newsletter and its monthly research reports. He is also the founder of CrossASEAN Research and publishes on Smartkarma. He has over 30 years of experience covering Asian markets in equity sales and research. For the last 10 years, he has focused on SE Asia and more recently, included the digital economy in his coverage.