Equity Analyst, LightStream Research

Shifara Samsudeen, FCMA, CGMA

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Private Capital Markets

Throughout 2020, there have been rumours circulating about a merger between <a href="https://www.smartkarma.com/entities/gojek" target="_blank" data-smartkarma-citation="entities:25976:1" rel="noopener">Gojek (1379371D IJ)</a> and <a href="https://www.smartkarma.com/entities/grabtaxi-holdings-pte-ltd" target="_blank" data-smartkarma-citation="entities:26950:1" rel="noopener">Grab (0967655D SP)</a> . Towards the latter part of 2020, several news reports had stated that Grab and Gojek have agreed in principal to merge their operations and Grab has offered Gojek a 30% stake in the merged entity. Gojek and its shareholders were however pushing for a larger stake on account of the company’s extensive presence in Indonesia (which is Southeast Asia’s largest market), whereby the deal is yet on hold.On the other hand, on December 17th 2020, several news media outlets reported that <a href="https://www.smartkarma.com/entities/tokopedia-pt" target="_blank" data-smartkarma-citation="entities:24239:1" rel="noopener">Tokopedia PT (1087142D IJ)</a> has appointed US banks Morgan Stanley and Citibank as advisors for its IPO as it seeks to carry out plans to go public. Tokopedia had also been approached by Bridgetown Holdings (a special purpose acquisition company (Spac) backed by the Hong Kong businessman Richard Li and the Silicon Valley investor Peter Thiel). However, on 5th January 2021, Bloomberg reported that Gojek is now in talks with Tokopedia for a merger which would be carried out prior to a planned IPO of the combined entity, which is to list in the US and Indonesia.

Throughout 2020, there have been rumours circulating about a merger between Gojek (1379371D IJ) and Grab (0967655D SP) . Towards the latter part of 2020, several news reports had stated that Grab and Gojek have agreed in principal to merge their operations and Grab has offered Gojek a 30% stake in the merged entity. Gojek and its shareholders were however pushing for a larger stake on account of the company’s extensive presence in Indonesia (which is Southeast Asia’s largest market), whereby the deal is yet on hold.On the other hand, on December 17th 2020, several news media outlets reported that Tokopedia PT (1087142D IJ) has appointed US banks Morgan Stanley and Citibank as advisors for its IPO as it seeks to carry out plans to go public. Tokopedia had also been approached by Bridgetown Holdings (a special purpose acquisition company (Spac) backed by the Hong Kong businessman Richard Li and the Silicon Valley investor Peter Thiel). However, on 5th January 2021, Bloomberg reported that Gojek is now in talks with Tokopedia for a merger which would be carried out prior to a planned IPO of the combined entity, which is to list in the US and Indonesia.

Gojek-Tokopedia Merger: A Blockbuster Deal and Potentially Better than a Gojek-Grab Ride

ASEAN Insight Provider, CrossASEAN Research

Angus Mackintosh

ASEAN Insight Provider

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

The news that <a href="https://www.smartkarma.com/entities/gojek" target="_blank" data-smartkarma-citation="entities:25976:1" rel="noopener">Gojek (1379371D IJ)</a> and <a href="https://www.smartkarma.com/entities/tokopedia-pt" target="_blank" data-smartkarma-citation="entities:24239:1" rel="noopener">Tokopedia PT (1087142D IJ)</a> are in talks for a potential merger and future listing came with some excitement, given that it has the potential to create a homegrown Indonesian digital powerhouse in one fell swoop. 
This will present a challenge, not just to <a href="https://www.smartkarma.com/entities/sea-ltd" target="_blank" data-smartkarma-citation="entities:8509:1" rel="noopener">Sea Ltd (SE US)</a> and its Shopee platform but also for <a href="https://www.smartkarma.com/entities/grabtaxi-holdings-pte-ltd" target="_blank" data-smartkarma-citation="entities:26950:1" rel="noopener">Grab (0967655D SP),</a> which will suddenly find itself three steps behind its Indonesian rival having been a potential suitor, although that marriage would have been less than easy.
<a href="https://www.smartkarma.com/entities/gojek" target="_blank" data-smartkarma-citation="entities:25976:1" rel="noopener">Gojek (1379371D IJ)</a> has already stepped up its move into the digital banking space through the recent increase in its stake in <a href="https://www.smartkarma.com/entities/bank-jago-tbk-pt" target="_blank" data-smartkarma-citation="entities:31094:1" rel="noopener">Bank Jago (ARTO IJ)</a> to 22% but it also has strong backers for GoPay in the shape of <a href="https://www.smartkarma.com/entities/facebook-inc-a" target="_blank" data-smartkarma-citation="entities:665:1" rel="noopener">Facebook Inc A (FB US)</a> and <a href="https://www.smartkarma.com/entities/paypal-holdings-inc" target="_blank" data-smartkarma-citation="entities:4747:1" rel="noopener">Paypal Holdings (PYPL US).</a>
One key area of overlap between <a href="https://www.smartkarma.com/entities/gojek" target="_blank" data-smartkarma-citation="entities:25976:1" rel="noopener">Gojek (1379371D IJ)</a> and <a href="https://www.smartkarma.com/entities/tokopedia-pt" target="_blank" data-smartkarma-citation="entities:24239:1" rel="noopener">Tokopedia PT (1087142D IJ)</a> is on digital payments, where GoPay and OVO compete head-on. Given that Tokopedia holds a 35% stake in OVO, it is possible that it will decide to sell this stake with payments and financial services falling to GoPay. 
The combined entity will be a huge enabler for MSMEs from food providers to small businesses and as a result, will likely get significant support from the Indonesian government. 
Unlike a Gojek/Grab combination, there are few competition issues as <a href="https://www.smartkarma.com/entities/tokopedia-pt" target="_blank" data-smartkarma-citation="entities:24239:1" rel="noopener">Tokopedia PT (1087142D IJ)</a> and <a href="https://www.smartkarma.com/entities/gojek" target="_blank" data-smartkarma-citation="entities:25976:1" rel="noopener">Gojek (1379371D IJ)</a> operate in different verticals. There are also unlikely to be issues with any substantial lay-offs.
There will be significant synergies between the two companies in areas such as payments, with an ever-increasing use-case for GoPay and on making deliveries even more seamless for <a href="https://www.smartkarma.com/entities/tokopedia-pt" target="_blank" data-smartkarma-citation="entities:24239:1" rel="noopener">Tokopedia PT (1087142D IJ)</a>.
<a href="https://www.smartkarma.com/entities/tokopedia-pt" target="_blank" data-smartkarma-citation="entities:24239:1" rel="noopener"></a>The combined size of the two companies would be around US$18bn under the latest valuations but it could quite easily command a higher valuation with a US listing, although it is not yet sure what shape or form that listing will take.
A SPAC listing would be the least favorable option, given question marks over the real winners from such as structure. A straight IPO would be the most straightforward and preferred option, even if it takes a bit longer to execute. The merged entity will likely provide a more formidable adversary for <a href="https://www.smartkarma.com/entities/sea-ltd" target="_blank" data-smartkarma-citation="entities:8509:1" rel="noopener">Sea Ltd (SE US)</a> in Indonesia.

The news that Gojek (1379371D IJ) and Tokopedia PT (1087142D IJ) are in talks for a potential merger and future listing came with some excitement, given that it has the potential to create a homegrown Indonesian digital powerhouse in one fell swoop. 
This will present a challenge, not just to Sea Ltd (SE US) and its Shopee platform but also for Grab (0967655D SP), which will suddenly find itself three steps behind its Indonesian rival having been a potential suitor, although that marriage would have been less than easy.
Gojek (1379371D IJ) has already stepped up its move into the digital banking space through the recent increase in its stake in Bank Jago (ARTO IJ) to 22% but it also has strong backers for GoPay in the shape of Facebook Inc A (FB US) and Paypal Holdings (PYPL US).
One key area of overlap between Gojek (1379371D IJ) and Tokopedia PT (1087142D IJ) is on digital payments, where GoPay and OVO compete head-on. Given that Tokopedia holds a 35% stake in OVO, it is possible that it will decide to sell this stake with payments and financial services falling to GoPay. 
The combined entity will be a huge enabler for MSMEs from food providers to small businesses and as a result, will likely get significant support from the Indonesian government. 
Unlike a Gojek/Grab combination, there are few competition issues as Tokopedia PT (1087142D IJ) and Gojek (1379371D IJ) operate in different verticals. There are also unlikely to be issues with any substantial lay-offs.
There will be significant synergies between the two companies in areas such as payments, with an ever-increasing use-case for GoPay and on making deliveries even more seamless for Tokopedia PT (1087142D IJ).
The combined size of the two companies would be around US$18bn under the latest valuations but it could quite easily command a higher valuation with a US listing, although it is not yet sure what shape or form that listing will take.
A SPAC listing would be the least favorable option, given question marks over the real winners from such as structure. A straight IPO would be the most straightforward and preferred option, even if it takes a bit longer to execute. The merged entity will likely provide a more formidable adversary for Sea Ltd (SE US) in Indonesia.

Gojek and Tokopedia - Digital Game of Thrones

<a href="https://www.smartkarma.com/entities/tokopedia-pt" target="_blank" data-smartkarma-citation="entities:24239:1" rel="noopener">Tokopedia PT (1087142D IJ)</a> has confirmed that it has hired Morgan Stanley and Citigroup as advisers to help accelerate its plan to go public. The company has not yet decided which route to take to come to market, whether through a straightforward IPO or a SPAC listing, potentially through Richard Li and Peter Thiel's Bridgetown Holdings Ltd.
The company had previously stated that it would definitely seek a listing in its home market of Indonesia, with a potential dual listing in the US, although these statements were made pre-pandemic. 
Valuations for <a href="https://www.smartkarma.com/entities/tokopedia-pt" target="_blank" data-smartkarma-citation="entities:24239:1" rel="noopener">Tokopedia PT (1087142D IJ)</a> range from US$8-10bn, although after the last round of funding it was valued at US$7.5bn, making it Indonesia's second most valuation start-up after <a href="https://www.smartkarma.com/entities/gojek" target="_blank" data-smartkarma-citation="entities:25976:1" rel="noopener">Gojek (1379371D IJ)</a>, which was last valued at US$10bn.
An IPO would help the company realize a higher valuation, providing a currency to drive future growth, given it would be an alternative to <a href="https://www.smartkarma.com/entities/sea-ltd" target="_blank" data-smartkarma-citation="entities:8509:1" rel="noopener">Sea Ltd (SE US), </a>as the number 2 e-commerce player in Indonesia. <a href="https://www.smartkarma.com/entities/sea-ltd" target="_blank" data-smartkarma-citation="entities:8509:1" rel="noopener">Sea Ltd (SE US)</a> trades at 13x FY21E EV/Sales currently and just raised more than US$2bn through a placement of new ADS's. We look at <a href="https://www.smartkarma.com/entities/tokopedia-pt" target="_blank" data-smartkarma-citation="entities:24239:1" rel="noopener">Tokopedia PT (1087142D IJ)</a> and its positioning in more detail below the fold.

Tokopedia PT (1087142D IJ) has confirmed that it has hired Morgan Stanley and Citigroup as advisers to help accelerate its plan to go public. The company has not yet decided which route to take to come to market, whether through a straightforward IPO or a SPAC listing, potentially through Richard Li and Peter Thiel's Bridgetown Holdings Ltd.
The company had previously stated that it would definitely seek a listing in its home market of Indonesia, with a potential dual listing in the US, although these statements were made pre-pandemic. 
Valuations for Tokopedia PT (1087142D IJ) range from US$8-10bn, although after the last round of funding it was valued at US$7.5bn, making it Indonesia's second most valuation start-up after Gojek (1379371D IJ), which was last valued at US$10bn.
An IPO would help the company realize a higher valuation, providing a currency to drive future growth, given it would be an alternative to Sea Ltd (SE US), as the number 2 e-commerce player in Indonesia. Sea Ltd (SE US) trades at 13x FY21E EV/Sales currently and just raised more than US$2bn through a placement of new ADS's. We look at Tokopedia PT (1087142D IJ) and its positioning in more detail below the fold. 

Tokopedia PT (1087142D IJ) - From Private to Public by Hook or by Crook

Equity Bottom-Up

A follow-up call with <a href="https://www.smartkarma.com/entities/mitra-adiperkasa-tbk-pt" target="_blank" data-smartkarma-citation="entities:18684:1" rel="noopener">Mitra Adiperkasa (MAPI IJ)</a> management after it released results to get a better feel for its digital initiatives revealed continuing positive momentum behind the company's "Unified Retail" approach to its business, with its digital presence likely to continue to drive its future growth. 
The company has already put through some aggressive inventory adjustments, which put it in a good position to benefit from the pick-up in sales towards the end of the year, without aggressive blanket promotions.
The drive online is being channeled through MAPclub, which now has 3.25m members, and is the largest loyalty program in Indonesia. This will continue to be a key growth driver for <a href="https://www.smartkarma.com/entities/mitra-adiperkasa-tbk-pt" target="_blank" data-smartkarma-citation="entities:18684:1" rel="noopener">Mitra Adiperkasa (MAPI IJ)</a> in 2021.
<a href="https://www.smartkarma.com/entities/map-aktif-adiperkasa-pt" target="_blank" data-smartkarma-citation="entities:27291:1" rel="noopener">MAP Aktif Adiperkasa PT (MAPA IJ)</a> will continue to benefit from increased health consciousness amongst Indonesians and has an even higher portion of its sales online than <a href="https://www.smartkarma.com/entities/mitra-adiperkasa-tbk-pt" target="_blank" data-smartkarma-citation="entities:18684:1" rel="noopener">Mitra Adiperkasa (MAPI IJ)</a>. 
<a href="https://www.smartkarma.com/entities/mitra-adiperkasa-tbk-pt" target="_blank" data-smartkarma-citation="entities:18684:1" rel="noopener">Mitra Adiperkasa (MAPI IJ)</a> will launch Boots and Amore Pacific brands in the coming year, which should boost growth and it has dropped some non-performing brands. DigiMAP, the company's online electronics platform, will also be an ongoing growth driver. 
The company is trading on 24.9x FY21E PER and 15.8x FY22E PER versus its 3-year average forward PER of 21x and continues to be our top pick as a play on the retail recovery.

A follow-up call with Mitra Adiperkasa (MAPI IJ) management after it released results to get a better feel for its digital initiatives revealed continuing positive momentum behind the company's "Unified Retail" approach to its business, with its digital presence likely to continue to drive its future growth. 
The company has already put through some aggressive inventory adjustments, which put it in a good position to benefit from the pick-up in sales towards the end of the year, without aggressive blanket promotions.
The drive online is being channeled through MAPclub, which now has 3.25m members, and is the largest loyalty program in Indonesia. This will continue to be a key growth driver for Mitra Adiperkasa (MAPI IJ) in 2021.
MAP Aktif Adiperkasa PT (MAPA IJ) will continue to benefit from increased health consciousness amongst Indonesians and has an even higher portion of its sales online than Mitra Adiperkasa (MAPI IJ). 
Mitra Adiperkasa (MAPI IJ) will launch Boots and Amore Pacific brands in the coming year, which should boost growth and it has dropped some non-performing brands. DigiMAP, the company's online electronics platform, will also be an ongoing growth driver. 
The company is trading on 24.9x FY21E PER and 15.8x FY22E PER versus its 3-year average forward PER of 21x and continues to be our top pick as a play on the retail recovery.

Mitra Adiperkasa (MAPI IJ) - Unifying with the Digital World

The talk that <a href="https://www.smartkarma.com/entities/grabtaxi-holdings-pte-ltd" target="_blank" data-smartkarma-citation="entities:26950:1" rel="noopener">Grab (0967655D SP)</a> and <a href="https://www.smartkarma.com/entities/gojek" target="_blank" data-smartkarma-citation="entities:25976:1" rel="noopener">Gojek (1379371D IJ)</a> are in the advanced stage of merger talks seems to be a reiteration of the earlier chatter and certainly some wishful thinking from the <a href="https://www.smartkarma.com/entities/grabtaxi-holdings-pte-ltd" target="_blank" data-smartkarma-citation="entities:26950:1" rel="noopener">Grab (0967655D SP)</a> and its shareholders perspective in my view. Certainly, <a href="https://www.smartkarma.com/entities/softbank-corp" target="_blank" data-smartkarma-citation="entities:27445:1" rel="noopener">Softbank Corp (9434 JP)'</a>s Masayoshi Son has made it known that he would like to see a merger happen.
Not a great surprise, given that <a href="https://www.smartkarma.com/entities/grabtaxi-holdings-pte-ltd" target="_blank" data-smartkarma-citation="entities:26950:1" rel="noopener">Grab (0967655D SP)</a> is burning more cash than <a href="https://www.smartkarma.com/entities/gojek" target="_blank" data-smartkarma-citation="entities:25976:1" rel="noopener">Gojek (1379371D IJ) </a>to stand still. It also operates on a higher cost base with its headquarters in Singapore. There are sure to be Investment Banks in the background pushing for a deal but this does not mean it will happen.
The amazing performance of <a href="https://www.smartkarma.com/entities/sea-ltd" target="_blank" data-smartkarma-citation="entities:8509:1" rel="noopener">Sea Ltd (SE US)</a>, which is up by +880% over the last year and now South East Asia's largest market cap stock at US$90.8bn makes a future listing enticing to realize future value. 
The key will be Indonesia, which is after all the region's largest internet market and <a href="https://www.smartkarma.com/entities/gojek" target="_blank" data-smartkarma-citation="entities:25976:1" rel="noopener">Gojek (1379371D IJ)</a>'s largest market. Surely we should also consider <a href="https://www.smartkarma.com/entities/gojek" target="_blank" data-smartkarma-citation="entities:25976:1" rel="noopener">Gojek (1379371D IJ)</a> shareholders in this? They may not be so willing to relinquish control? 
The overriding battle will continue to be between the Chinese behemoths <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent Holdings (700 HK)</a> and <a href="https://www.smartkarma.com/entities/alibaba-group-holding-ltd" target="_blank" data-smartkarma-citation="entities:787:1" rel="noopener">Alibaba Group (BABA US),</a> which hold stakes in <a href="https://www.smartkarma.com/entities/gojek" target="_blank" data-smartkarma-citation="entities:25976:1" rel="noopener">Gojek (1379371D IJ)</a> and <a href="https://www.smartkarma.com/entities/grabtaxi-holdings-pte-ltd" target="_blank" data-smartkarma-citation="entities:26950:1" rel="noopener">Grab (0967655D SP)</a> respectively. These two companies are engaged in an ongoing land grab in the digital space in South East Asia, and more especially in Indonesia and it seems unlikely that they would be in cahoots with each other.  
It would seem unlikely that <a href="https://www.smartkarma.com/entities/gojek" target="_blank" data-smartkarma-citation="entities:25976:1" rel="noopener">Gojek (1379371D IJ)</a> would relinquish ultimate management control to <a href="https://www.smartkarma.com/entities/grabtaxi-holdings-pte-ltd" target="_blank" data-smartkarma-citation="entities:26950:1" rel="noopener">Grab (0967655D SP)</a> given the dominance in its home market. It has also been quietly rebranding in the region, which could spell a more aggressive approach outside Indonesia is in the offing.

The talk that Grab (0967655D SP) and Gojek (1379371D IJ) are in the advanced stage of merger talks seems to be a reiteration of the earlier chatter and certainly some wishful thinking from the Grab (0967655D SP) and its shareholders perspective in my view. Certainly, Softbank Corp (9434 JP)'s Masayoshi Son has made it known that he would like to see a merger happen.
Not a great surprise, given that Grab (0967655D SP) is burning more cash than Gojek (1379371D IJ) to stand still. It also operates on a higher cost base with its headquarters in Singapore. There are sure to be Investment Banks in the background pushing for a deal but this does not mean it will happen.
The amazing performance of Sea Ltd (SE US), which is up by +880% over the last year and now South East Asia's largest market cap stock at US$90.8bn makes a future listing enticing to realize future value. 
The key will be Indonesia, which is after all the region's largest internet market and Gojek (1379371D IJ)'s largest market. Surely we should also consider Gojek (1379371D IJ) shareholders in this? They may not be so willing to relinquish control? 
The overriding battle will continue to be between the Chinese behemoths Tencent Holdings (700 HK) and Alibaba Group (BABA US), which hold stakes in Gojek (1379371D IJ) and Grab (0967655D SP) respectively. These two companies are engaged in an ongoing land grab in the digital space in South East Asia, and more especially in Indonesia and it seems unlikely that they would be in cahoots with each other.  
It would seem unlikely that Gojek (1379371D IJ) would relinquish ultimate management control to Grab (0967655D SP) given the dominance in its home market. It has also been quietly rebranding in the region, which could spell a more aggressive approach outside Indonesia is in the offing. 

Indonesia

Tokopedia PT provides e-commerce services. The Company owns and operates an online e-commerce platform that allows individuals and small-to-mid-sized business owners to start their online stores.

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Tokopedia PT (1087142D IJ)

Gojek-Tokopedia Merger: A Blockbuster Deal and Potentially Better than a Gojek-Grab Ride

Gojek is now in talks with Tokopedia for a merger which would be carried out prior to a planned IPO of the combined entity, which is to list in the...

Shifara Samsudeen, FCMA, CGMA

Gojek and Tokopedia - Digital Game of Thrones

The potential merger of Gojek and Tokopedia with a listing of the combined entity planned at a future date will provide investors with an exciting...

Angus Mackintosh