Bukalapak IPO Becomes Exit Strategy of Old Investors, Is It True?

Jakarta, CNBC Indonesia – One more minute startup unicorn In Indonesia, PT Bukalapak.com Tbk (BUKA) will soon officially become a public company whose shares can be traded on the stock exchange through an Initial Public Offering (IPO) mechanism.

The initial offering of the e-commerce startup led by Achmad Zaky has become a hot topic of discussion in various circles, from investors, regulators, to analysts.

The market was filled with euphoria from institutional to retail investors scrambling in line to order shares that will go on the floor with the code BUKA until it was reported that the order was oversubscribed by 4 times.

But there are also many people who sneer at the euphoria that occurs in the market.

Most of them are activists value investing. ‘Why do you want to buy a loss-making company at a premium price?’.

More or less that is the question of the value investor.

It is true that the share price of OPEN is classified as premium. Without further ado, let’s review how OPEN has been performing so far.

More than a decade of existence, OPEN still posted losses. OPEN’s net loss was Rp 303.8 billion in the first quarter of this year.

Looking back, in 2020, the total current loss of this e-commerce company backed by Emtek Group (EMTK) reached Rp 1.35 trillion. With equity (capital) of Rp 1.61 trillion last year, it is clear that the loss looks very large.

In the OPEN prospectus, the company will issue 25.76 billion shares, equivalent to 25% of the company’s paid-up and issued shares.

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The offering price is said to be set at the highest level of Rp. 850/share, so the total funds to be raised if the IPO is successful will reach Rp. 21.9 trillion.

Its market capitalization indicative target after the IPO reaches Rp 87.6 trillion. BUKA shares will be included in the technology sector index.

With a market cap of that size, BUKA will become the 15th largest company right under the state-owned bank PT Bank Negara Indonesia (Persero) Tbk (BBNI) of course this has not calculated the increase in BUKA on the first day of trading, where often new shares just the IPO shot to a daily high (ARA, 25% increase in one day).

In addition, the technology index weight which was only 5.52% of the total market capitalization of the JCI will be raised to 6.69%.

Furthermore, if you look at the funds raised from the initial offering which reached almost Rp 22 trillion, the total equity in the OPEN balance sheet would be Rp 23.6 trillion or an increase of almost 20 times so that the Price to Book Value (PBV) ratio is still in the range of 3.5 times. post-IPO.

Interestingly, the value investor consider if this valuation is very expensive, especially if you look at BUKA’s income which is only at Rp. 1.35 trillion in 2020, the Price to Sales Ratio (PSR) metric commonly used to evaluate the shares of retail issuers will be at 64 times, much higher than the retail companies listed on the stock exchange whose PSR is only under 2 times.

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Interestingly if investors use open income as a meal comparison it will not apple to apple with other retailers, because in reality, BUKA’s income is only the total commission received by BUKA from transactions that occur on the Bukalapak.com platform, while in other retail companies, the income received is the result of all sales of the retailer.

Various valuation metrics that better reflect the company’s business model such as using Gross Merchandise Value (GMV), Gross Transaction Value (GTV) to Total Processing Value (TPV) are more suitable to be applied.

Conservatively, the TPV figure is most suitable because this number calculates the total purchases that have been paid by consumers that have occurred on the Bukalapak platform.

If you look at the number of OPEN TPV, it was recorded that it reached Rp. 85.08 trillion in 2020, so the company’s P/TPV ratio is below 1, exactly 1.02 times, so the valuation tends to be reasonable.

Especially considering that in 2018 Bukalapak’s TPV was only at IDR 28.34 trillion, which means there was a growth of 44.26% compounding per year (CAGR). This is what is considered attractive by investors, especially those who are ‘growth-investing’ schools.

Next: Pros and Cons in Other Aspects


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