We revise our earnings forecasts and raise our target price for Bukalapak by 5%. Our new target price of IDR481 suggests 44% upside from the current share price. We reiterate our Buy recommendation.
Three factors to note:
Bukalapak's Mitra take rate has risen from 1.0% to 2.8% between Q2 21 and Q2 22. This increase can be ascribed to the traction that Bukalapak is generating from Indonesia's vast network of warungs (corner shops). Bukalapak has succeeded in not only connecting the Warungs to the e-commerce network, but has also provided bookkeeping and CRM tools. We are bullish on Bukalapak's ability to raise take rates further in this segment.
Bukalapak's Marketplace take rate is also on the ascendancy. It rose from 1.8% to 2.1% between Q2 21 and Q2 22. The commission fee charged by the marketplace is widening as e-commerce is gathering momentum in Indonesia's hinterland. Bukalapak's marketplace business targets Indonesia's Tier 2 and Tier 3 cities.
The market appears to underappreciate Bukalapak's low cash burn rate and high cash balance. The firm has a net cash balance of US$1.3bn and we expect an average FCF burn of US$22mn in the forecast period, which would fund a cash burn of 10+ years.