Key indicators suggest Bukalapak is overpriced, but IPO may still be oversubscribed

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The initial public offering of the Indonesian marketplace Bukalapak, which opens for subscription on July 28, appears to be overvalued based on various valuation parameters.

However, whether or not to subscribe to stocks is an open question, as there is more to the business than meets the eye, according to analysts interviewed by DealStreetAsia.

the Market supported by the Emtek group – which will be the first among Indonesian unicorns to go public – plans to raise up to $ 1.5 billion by issuing 25.76 billion new shares at a offering price of Rp 750-850 per share. At this beach, mall traditional metrics suggest stocks are in an overvalued zone.

Valuation metrics flash red

We assessed Bukalapak on the basis of three key indicators.

Price to Book Value (PBV): A company’s book value (PBV) price is used to compare its market capitalization to its book value, which is the net value of its assets.

The current book value per share (BVPS) of Bukalapak has been estimated at Rp22.1, according to Anton Hermansyah, Senior Investment Information Analyst at Korea Investment and Sekuritas Indonesia.

Therefore, if Bukalapak IPO occurs at Rp 800 per share – that is, in the middle of the price range – existing shareholders could sell their shares at a PBV ratio of 36.2 times. (800 Rp / 22.1 Rp), estimates Hermansyah.

This suggests a premium over peers. Even for Amazon, the highest PBV recorded over the past 13 years was only 28 times. More recently, Coupang – South Korea’s largest e-commerce company, which IPOed in the United States in March this year, raising $ 4.6 billion – had a GVP of 26.1 times. Coupang shares have fallen nearly 18% since its listing on NYSE.

“If we take a traditional metric [like PBV], Bukalapak’s shares would be expensive. However, since this is the first unicorn listed on IDX, it could be different from Coupang, ”Hermansyah said.

Moreover, Bukalapak’s PBV, after a successful IPO, will be at a more acceptable level, Hermansyah added. Since the company issues 25 billion new shares on the public list, his net worth will increase by 20.6 trillion rupees, assuming a price per share of 800 rupees. This will increase the BVPS to 216.4 rupees and the PBV to 3.7 times, explained Hermansyah.

Company sales value: Another simple metric to measure Bukalapak’s valuation is the company’s value-to-sales ratio. The metric compares the company’s total value to its sales. A lower value indicates a fair valuation.

DealStreetAsia compared the EV / sales of Bukalapak and NYSE-listed Sea Ltd. based on their 2020 financials.

Assuming Bukalapak will have a market cap of $ 5.34-6.05 billion (Rp 800 * 103.06 billion shares outstanding), Bukalapak’s EV / sales is 57.39X, well above the 32.31X of Sea Ltd, which operates the Shopee e-commerce site.

Front EV / GMV ratio: Bukalapak’s valuation of $ 5.6 billion also suggests a forward EV / GMV ratio of 1.5x, higher than rival Tokopedia of 0.5x, which has at least three times the gross value of the commodity ( GMV) and Bukalapak web tours, noted analysts Nathan Naidu. and Matthew Kanterman for Bloomberg Intelligence. Bukalapak’s EV / GMV ratio is also much higher than Alibaba’s at 0.4x.

The high premium suggests that investors have an appetite for Southeast Asian tech and digital platforms due to the lack of listed alternatives, analysts added, but “Bukalapak’s market share in Indonesia does not justify its valuation “.

Read between numbers

Despite the seemingly expensive ratios, CrossASEAN Research analyst Angus Mackintosh said Bukalapak’s path to profitability is much clearer than that of its peers Tokopedia and Shopee.

“Bukalapak has much lower promotional costs and those costs are also falling, which means the company may soon start to be valued on EV / gross vehicle profits rather than just sales,” Mackintosh said.

Bukalapak’s losses were reduced in 2020 to 1.349 billion rupees ($ 92.66 million), compared to 2.8 trillion rupees ($ 191.99 million) in 2019. increase from figure of 291.9 billion Rp in 2018.

Marketing and sales spending fell 34.5% from 2.32 trillion rupees ($ 160.27 million) in 2019 to 1.52 trillion rupees ($ 104.86 million) in 2020 , as she launched a cash flow efficiency strategy in the midst of the pandemic.

Mackintosh also pointed out that Bukalapak’s 7 million Mitra Bukalapak partners (mom and pop stores or individual agents) are the main source of revenue for the platform. The platform can get Mitras to join, given the range of products it offers.

“Instead of offering gifts and products at very discounted prices, Bukalapak seeks to allow Mitras to give them access to a wider range of products which they can sell for a small fee (1-2%)”, Mackintosh said.

Support from Grab (indirectly) and Bank Rakyat Indonesia (BRI) also bodes well for Bukalapak. Grab owns around 5% of the shares of the Emtek group, which in turn owns around 32% of the shares of Bukalapak through its subsidiary PT Kreatif Media Karya (KMK). BRI Ventures could integrate the products and services of its Bank Rakyat Indonesia unit in Bukalapak. State-owned BRI is Indonesia’s largest lender focusing on SMEs and rural areas, a segment that aligns with Bukalapak’s business.

Expect high demand

All in all, the Bukalapak IPO will most likely be oversubscribed.

“Some investors are betting on the long-term potential of the digitalization of warungs. Another group does not believe in e-commerce, but they will still buy the stocks as Bukalapak may soon become a component of major stock indexes. The latter group will invest because of FOMO (Fear of Missing Out), ”said a private bank analyst, who declined to be named.

The digitization of warungs has become a popular investment theme around the world. Besides Bukalapak, other B2B trade companies such as GudangAda, Warung Pintar, Ula, Super and digital accountants, BukuWarung and BukuKas have attracted investment. Likewise, in India, players like ShopKirana, Jumbotail, Khatabook and Reliance who are empowering mom-and-pop stores and have raised big investments.

However, none of the startups are profitable. “He [Lack of profits] does not mean that the business model will not be successful. Bukalapak has raised huge funds, and people are now looking at how he can achieve positive EBITDA, ”said the analyst quoted above.


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