Gojek/Tokopedia: GoTo guys seek superapp appeal
If you can’t beat ’em, join up with one of ’em. That is the strategy of two of Indonesia’s largest tech start-ups, Gojek and Tokopedia. The pair, active in ride-hailing and ecommerce, are merging as competition heats up in south-east Asia. Getting closer in size to competitors, Grab and Sea, is key to staying in the game.
Unusually, the merger also spawns a better name — GoTo — rather than a tortured acronym. The group may list in Jakarta and New York later this year with a target worth of up to $40bn. That is a step up from private valuations of $18bn. GoTo would be on a par with south-east Asia’s biggest ride-hailing and food delivery firm, Grab, which merged with a listed US special purpose acquisition company last month.
There is plenty of potential. Indonesia is the world’s fourth-most populous nation. But adoption of internet services is only just getting started in smaller cities. South-east Asian start-ups have successfully expanded in fast-growing Vietnam, Malaysia, Thailand and Singapore. The gross merchandise value of south-east Asia’s internet economy is expected to grow threefold from last year to $300bn by 2025, according to a report by Google and Bain.
The sector has lured foreign investment. Gojek and Tokopedia’s backers include Google, Facebook, SoftBank and Alibaba. New York-listed Sea is valued at $113bn and trades at an enterprise value to forward sales of 14 times. That is four times the figure for Amazon.
Combining Gojek’s ride-hailing and payments services with Tokopedia’s ecommerce services plays to a trend. South-east Asians love superapps offering everything from groceries to personal finance. Sea, the region’s biggest tech group, has been expanding aggressively. In a part of the globe where many customers are poor, volume matters.
The worry for investors is that Indonesia has iteratively been the country of the future. This archipelago of 17,000 islands is a logistical nightmare for a range of businesses, especially ecommerce. GDP per capita is about $4,000 — around half that of China. The poverty rate, which rose last year, is still high at 10.2 per cent. Another fifth of the population is not far off, with income of about $1.90 a day.
Growing interest in the region’s tech companies has been reflected in the 212 per cent gain in the shares of Sea over the past year. This is a story investors should buy into during market dips. GoTo’s mooted float is unlikely to be that opportunity. Merger benefits will be in the price.
The Lex team is interested in hearing more from readers. Please tell us what you think of south-east Asia as an investment prospect in the comments section below