Indonesian e-commerce site Bukalapak (JK:BUKA) has seen its shares soar 24.7% on their debut day on Friday, in Indonesia's largest-ever stock offering.
Bukalapak stock closed at 1,060 rupiah, up the maximum 25% limit from its offer price of 850 rupiah. A circuit breaker then kicks in, suggesting there may be more to run next week. The company raised US$1.5 billion, the first "unicorn" to list and offer exposure to the Indonesian Internet expansion.
Investors would do well to consider exposure to Southeast Asia's largest consumer market. That's all the truer now that Chinese e-commerce operators such as Alibaba Group Holding (BABA) , JD.com (JD) , and Pinduoduo (PDD) have come under intense scrutiny by Beijing regulators.
Bukalapak ranks third behind Tokopedia and Shopee for monthly traffic, according to Statista, with an average of 34.2 million monthly clicks in Q1. It had 104.9 million registered users as of the end of last year.
But it is the first to go public. Bukalapak says it will use the money for working capital and to expand.
The company started life in 2010, mainly to serve the legion of Indonesian micro- and small-size businesses serving Indonesian consumers. Its name means "to open a stall," or warung as Indonesian small shops are known. The company serves some 6.5 million online merchants, with 70% of its business coming outside Indonesia's largest cities.
Its performance will be a guide to the appetite and likelihood of success for future Southeast Asian tech listings.
Larger rival Tokopedia agreed in June to merge with Indonesian superapp Gojek, originally a ride-hailing service, to form the GoTo Group, in Southeast Asia's largest-ever tech deal. GoTo, with a valuation of around US$18 billion, is eyeing a market listing next year.
Indonesia has a young, increasingly tech-savvy and wealthy urban population, with the bulk of the economy on Java, the world's most-populous island. Jakarta, with a core population of 10 million and 30.5 million in the metro area, is the fourth-biggest city in Asia, behind only Delhi, Tokyo and Shanghai.
Bukalapak shares priced at the top of their 750-850 rupiah range. The 25.8 billion shares in the offering amount to 25.0% of the company. So the listing, after today's jump, values Bukalapak at US$7.6 billion.
The company had originally sought only to raise US$300 million with its IPO. The expansion of the offering's size to US$1.5 billion will encourage other Indonesian tech companies to list, and a host of entrepreneurs are waiting in the wings. Private-equity investors have been put off putting money to work in Indonesia due to the lack of an easy exit strategy, with the public market now presenting itself as that opportunity.
Bukalapak is backed by Microsoft (MSFT) as well as the Alibaba fintech spinoff Ant Group, the Singapore sovereign investment fund GIC and Indonesian tech and media conglomerate Emtek (JK:EMTK).
Revenue for the e-commerce company rose to 1.35 trillion rupiah (US$95.8 million) last year. It lost an almost equal amount, US$89.5 million, although it cut the flow of red ink by more than half.
Investors are clearly betting that its compound growth rate, averaging 115% each of the last two years, will push the loss-making company into the black. Reuters says the IPO was priced off a valuation of 16 times next year's estimated sales.
The Bukalapak IPO was offered to international investors as well as domestic ones. The global book is being run by the Singapore offices of UBS and Merrill Lynch. For the domestic portion of the shares, Mandiri Sekuritas and Buana Capital Sekuritas are the lead underwriters, with the local offices of UBS and the Korean brokerage Mirae as junior underwriters.
The Indonesian stock market's performance belies Southeast Asia's largest outbreak of COVID-19. The Jakarta Composite Index has risen 19.8% so far this year, and has even put on 2.6% in the last month despite a runaway infection rate in June and July, by far its worst.
Indonesia on July 3 re-imposed restrictions on movement, faced with an exponential leap in COVID cases that overwhelmed hospitals. The minister in charge of the containment measures said on Monday that the country is looking to reopen in September, depending on vaccinations.
Only the United States and India are seeing more daily COVID cases globally, with a daily average of 33,875 new confirmed infections in Indonesia. The country's worst peak seems to have peaked, with the daily rate down 23%, but the burden of daily deaths, at 1,689, is by far the heaviest in the world, double the next-worse nation, Brazil, at 887 fatalities. More than 100,000 Indonesians (102,375 at last count) have now lost their lives in the pandemic.
The world's largest archipelago began injections in January but has struggled to get needles into arms across more than 17,000 islands. Only 8.2% of the 275 million population are fully covered.
E-commerce operators such as Bukalapak have thrived during Indonesia's restrictions, however. Its successful listing will only help it expand on its success, and encourage other Southeast Asian tech companies to follow suit.
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