GOTO Owns Strong Cash to Achieve Positive EBITDA Without External Funding
By : Abraham Sihombing | Tuesday, February 21 2023 - 11:37 IWST
The ceremony atmosphere of the Initial Listing of Shares of PT GoTo Gojek Tokopedia Tbk at the Indonesia Stock Exchange Building, Jakarta. (Photo: GoTo)
Jakarta - The financial strength of PT GoTo Gojek Tokopedia Tbk (GOTO) also supports its efforts to achieve positive Adjusted EBITDA in the fourth quarter of 2023. No new external funding sources are required.
The Mandiri Sekuritas Analyst Research noted that GOTO’s cash position reached IDR31.6 trillion until the third quarter of 2022. Meanwhile, in the same period, minus or loss Adjusted EBITDA (loss run-rate) remained at IDR3.7 trillion.
“GOTO does not require external fundraising to achieve profitability,” wrote the research, compiled by analysts Adrian Joezer and Ryan Aristo.
With this situation, GOTO will join its Southeast Asian competitor Shopee (SEA Group Ltd) in reaching Adjusted EBITDA break-even by the end of 2023. This is ahead of another major player in the industry, GRAB, which will reach positive Adjusted EBITDA in the second half of 2024.
“This Adjusted EBITDA break-even (GOTO) target is five quarters ahead of our previous target of the first quarter of 2025,” the research added.
Therefore, Mandiri Sekuritas maintains its BUY recommendation for GOTO shares with a target price (TP) of Rp230 per share or 90.1% higher than Rp121 per share when this research was prepared.
This situation is reinforced by the realization of significant efficiency from GOTO, including in the promotion strategy post.
“We see that the cash burn has dropped by 60-65 percent from the initiatives taken,” said GoTo's Group Chief Financial Officer, Jacky Lo, separately.
The reduction in “burn money” costs is the result of a strategy to discipline all costs. All costs incurred have been reviewed and this effort is consistently carried out so that it is effective and right on target.
Jacky explained, based on the financial statements as of September 30, 2022, GOTO owned cash of around Rp31 trillion. The cash outflow figure was Rp4 trillion per quarter or if a straight line is drawn, GOTO released cash of around Rp16 trillion in a year.
Even so, it ensures that cost optimization and increased monetization will continue to occur at GOTO so that cash burn or cash usage can continue to fall every quarter.
The GoTo Group President Director, Andre Soelistyo, said the new profitability target will bring the company closer to positive operating cash flow. This is the result of GoTo's strategic plan which includes revenue optimization, cost management, and the development of integrated ecosystem-based products and services (ecosystem product growth) to support long-term sustainable growth.
As for the structure, Andre said, adjusted EBITDA is a proxy indicator to show cash flow that can be used to develop the business independently without external funding.
“As a result of the ongoing strategy execution, the Company will be able to record positive adjusted EBITDA in the fourth quarter of 2023. The Company has the right human resources, supported by sufficient liquidity to execute our plans, in line with our mission to build the most impactful technology ecosystem in Indonesia, and be able to provide positive value to society,” said Andre in GOTO's press release.
EBITDA, which stands for Earnings Before Interest, Taxes, Depreciation, and Amortization, is one measure of a company’s overall financial performance. A positive EBITDA is an important step before the company can finally achieve net profit.***