Indonesian unicorn Bukalapak poised for first-mover advantage in market debut

Mitra Bukalapak agent. courtesy by Bukalapak

Indonesian e-commerce unicorn Bukalapak’s proposed mid-year listing on the local stock exchange is expected to set the pace for market debut lineups by other regional tech giants. 

Per the timeline mentioned in its documents, seen by DealStreetAsia, Bukalapak is targeting a market debut by July 29, 2021, which will make it the region’s first listed unicorn of its generation.

“Its success will affect the IPO of other unicorns in the market,” said Thendra Crisnanda, Head of Research at Indonesia’s MNC Sekuritas.

Singapore-headquartered Grab is set to list in the US via a merger with blank-cheque company Altimeter Growth Corp by the end of this year.  Additionally, GoTo, the entity formed after the merger of Indonesian unicorns Gojek and Tokopedia, could raise as much as $2 billion when it goes public.

However, Crisnanda added, “Investors are more excited about GoTo’s IPO compared to Bukalapak, as they are more familiar with Gojek and Tokopedia’s business model. Nevertheless, Bukalapak can maximise the timing, which can be an important indicator or strategy. Bukalapak will have the first-mover advantage, which others don’t have.”

With the first-mover advantage, Nirgunan Tiruchelvam, head of the consumer sector equity research at Tellimer, said Bukalapak might be able to achieve its valuation at the top end. However, the proposed IPO still faces risks, particularly on account of the dual-class structure, and not being listed in the US. “The liquidity (in the IDX) is not the same as the US market [which is the largest pool of capital],” Tiruchelvam said.

Meanwhile, Bukalapak’s impending market debut is already driving a frenzy for the shares in the Indonesian market.

“The demand (for Bukalapak’s shares) is soaring. It [The unicorn] started to raise only $300 million, but it gradually increased its target to $500 million, then $800 million, and will likely be about $1 billion. Meanwhile, the demand side could achieve up to $3 billion, and will be the largest in Indonesia, even though people rarely use the app,” an analyst at a foreign bank, who declined to be identified, told DealStreetAsia. 

The 11-year-old company is reportedly looking to raise as much as $800 million in the domestic listing by offering up to 25% of its enlarged share capital to the market. 

Mirroring US market

The demand for tech stocks is likely driven by increased investor interest in these bets as well as a growing case for the Southeast Asia growth story buoyed by the spectacular success of Sea Group.

In Indonesia, the tech sector has won the confidence of investors following the pandemic-induced shift from offline to online across various products and services. The market is also cheering the resilience of tech companies, particularly those listed in the US market, for their impressive growth compared to traditional firms. 

Shares of the Singapore-headquartered gaming and e-commerce company, Sea Group, which listed on the New York Stock Exchange in October 2017, rose nearly 400% last year and are up a further 45% year-to-date. 

“There is an assumption that Indonesia market will potentially resemble the US market by 2025. Referring to the US market today, the top 20 companies by market cap are dominated by the tech sector, a different segment from what we saw in 2000, when traditional companies in the banking, oil and gas, and mining sectors, ruled the list. Hence, many tech stocks in IDX have risen steeply since early this year [following global cues],” Sucor Sekuritas CEO Bernadus Wijaya said. 

The stock price of tech and digital-related stocks has soared even though a digital business unit might contribute only a small portion to the companies’ revenue. Share prices of digital banks, last-mile delivery and data centre firms, grocery stores, digital advertising, internet network provider have increased following a surge in demand for their services. 

Wijaya revealed that some investors are more realistic in adapting to tech stocks that have not booked profit yet but can grow faster and multiply the earnings. 

Parallelly, the performance of traditional companies in the LQ45 index – a stock market index consisting of 45 blue-chips companies – has remained sluggish during the pandemic. 

“For years, people thought investing in the largest Indonesian automaker and distributor Astra International Tbk (ASII) was promising. However, the car sales never reached their 2013 peak of 1.2 million units again. As a result, the ASII stock price has dropped since last year and is hardly likely to rebound fast,” the analyst said. Per last week, ASII price was at Rp 4,920 per share. It had reached the peak at Rp 9,150 per share on 21 April 2017. 

Will markets cheer the Bukalapak model?  

Like Tokopedia and Shopee, Bukalapak was established as a marketplace in 2011. However, unlike the cash-burning e-commerce model, Bukalapak forayed into the offline segment in 2016 when it launched a second app to empower the mom-and-pop shops or warungs.

Called Mitra Bukalapak (Mitra), the app enables MSMEs, including warungs and agents, to sell virtual products like phone credit, data plans, electricity vouchers, and train tickets. Mitra also connects the end users to buy goods on the Bukalapak platform. 

By 2020, Bukalapak has registered 7 million Mitras, primarily located in the second and third-tier cities. The company claimed to be the most extensive network, which penetrated 39% of the e-warung market share. 

Penetrating warungs has been a playbook for some startups as it is believed to be Indonesia’s most significant retail sales. According to a 2019 report by CLSA, up 65-70% of Indonesian retail sales were at offline merchants. 

Tiruchelvam said, Mitra Bukalapak will give a tremendous upside for the platform and the network, as the registered Mitras are still small compared to the total warung stores in Indonesia. 

According to the company document, the total processing value (TPV) in 2020 was $6 billion, consisting of TPV marketplace at $4.4 billion, and TPV Mitra at $1.6 billion. From 2018 to 2020, the total CAGR grew by 73.3%. Meanwhile, its CAGR growth for Mitra was 105%, and the marketplace was 65% in the same period. 

Bukalapak’s total processing value in 2018-2020 (source: company’s document)

The company’s revenue in 2020 was $96 million, dominated by the marketplace segment at $73 million. Meanwhile, Mitra Bukalapak contributed $14 million, and Buka Pengadaan contributed $9 million.

 

Bukalapak’s revenue in 2018-2020 (source: company’s document)

In terms of expenses, the document stated, the firm has pushed down its selling and marketing expenses. In 2019, selling and marketing expenses increased to $165 million, up 16.2% from $142 million in 2018. In 2020, it decreased 34.5% to $108 million. 

 

Bukalapak’s operating expenses from 2018 to 2020 (source: company’s document)

Expand Table

Net Cash Flow201820192020
Operating Activities($128 million)($217 million)($82 million)
Investing Activities($39 million)($6 million)($69,000)
Financing Activities$295 million$142 million$124 million

In terms of the cash flow, the document stated, its net cash flow for operating activities has decreased from (–$217 million) in 2019, to (–$82 million) in 2020, driven by increased monetization and improved operational efficiency. It also squeezed the net cash flow in investing activities, from (– $6 million) in 2019 to (–$69,000) in 2020 by shifting to cloud-based servers and IT outsourcing. Meanwhile, the financing activities have booked a positive net cash flow from $142 million in 2019 to $124 million in 2020. 

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.