Alert – Sea Ltd to benefit from rising e-commerce take-rates at GoTo
- GoTo’s e-commerce gross take-rate improved to 2.9% in 1Q22 (2.5% in 1Q21) but fintech take-rate declined further
- GoTo is e-commerce market leader in Indonesia but battling with Grab for No.1 spot in mobility and fintech.
- Sea Ltd should benefit from rising e-commerce take-rates and is trading at only 2.3x 12-month forward revenue versus its -1SD valuation of 3.1x. Maintain BUY on Sea Ltd with unchanged TP of US$115
GoTo’s on-demand gross revenue, which comprises of mobility and delivery, was up 58% led by growth in both gross transaction value (GTV) and take rates.
GoTo’s e-commerce gross revenue rose 53% from improvement in take-rate despite only 28% growth in GTV. In 2Q22, Tokopedia has further raised merchant commission rates by 50%-100% as disclosed by the company which is positive for the e-commerce sector.
GoTo’s Fintech revenue only rose 41% due to decline in take-rates. It was due to GoTo promotions on Tokopedia and acquisitions of high growth merchants for payments.
Is GoTo pursuing No.1 market share across key categories? Overall, GoTo’s Net Revenue after promotions rose only 6% y-o-y to IDR1.5tn due to high promotions. We think that GoTo intends to overtake Grab to claim clear No. 1 spot in mobility & delivery in Indonesia. GoTo already went past Shopee to be No. 1 in Indonesia in 3Q/4Q21 so e-commerce may be less competitive in our view. Similarly, fintech may remain competitive till GoPay can match or beat Grab’s OVO. According to the market rumors, GoTo is in the process of raising fresh funds of up to US$2bn via private placement. As management has not confirmed this, we are unsure about this fund raising.
2Q22F GoTo guidance points to 3.5%-3.9% gross take-rates vs 3.7% in 1Q22. Tokopedia should benefit from higher take-rates in e-commerce but on-demand could see stable take-rates due to high-competition for market share from the likes of Grab and already high take-rate of 21%.
GoTo 1Q22 result
| IDR Bn | 1Q21 | 1Q22 | Y-o-Y | 1Q22 as a % of consensus FY22F | 2Q22F Guidance by GoTo |
| On-Demand Services | 10,357 | 14,888 | 44% | ||
| E-Commerce | 51,020 | 65,135 | 28% | ||
| Financial Technology Services | 40,538 | 77,450 | 91% | ||
| Other Segments | – | 13 | |||
| Eliminations | (5,706) | (17,488) | 206% | ||
| Group GTV | 96,209 | 139,998 | 46% | 142-150 tn | |
| On-Demand Services | 1,985 | 3,127 | 58% | ||
| E-Commerce | 1,254 | 1,913 | 53% | ||
| Financial Technology Services | 254 | 358 | 41% | ||
| Other Segments | 150 | 7 | -95% | ||
| Eliminations | (235) | (174) | -26% | ||
| Group Gross Revenue | 3,408 | 5,231 | 53% | 5.3-5.6 tn | |
| Gross Take Rate | 3.54% | 3.74% | 5% | 3.5% – 3.9% | |
| Gross Take Rate breakdown | 1Q21 | 1Q22 | |||
| On-Demand Services | 19.2% | 21.0% | |||
| E-Commerce | 2.5% | 2.9% | |||
| Financial Technology Services | 0.6% | 0.5% | |||
| Promotion to Customers | (1,990) | (3,734) | 88% | ||
| Group Net Revenues | 1,418 | 1,497 | 6% | 14% | |
| Contribution | (1,167) | (3,021) | 159% | ||
| Group EBITDA | (2,768) | (5,943) | 115% | 19% | |
| Group Adjusted EBITDA | (1,900) | (5,447) | 187% |
Source: Company, DBS Bank