In 2023, Southeast Asia’s listed tech firms focused on getting their basics right—rationalising businesses, reducing promotional activity, and trimming operational expenditure—to reach the hallowed ground of profitability.
While the return to fundamentals has resulted in improved profitability across the board, the share prices of these listed firms have yet to recover.
DealStreetAsia’s recent report SE Asia’s Listed Tech firms: Outlook for 2024 examines why investors remain sceptical about the prospects for Southeast Asia’s listed tech firms. Among other hurdles, competition has increased in sectors such as ride-hailing and e-commerce, suggesting their ride towards sustained profitability will be bumpy.
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Sea Ltd: Facing off with TikTok Shop
Sea Ltd., which runs the popular e-commerce platform Shopee and gaming division Garena, posted a net profit for three quarters on the trot—from Q4 2022 to Q2 2023. It slipped back into the red in Q3 and Q4 2023 as competition from TikTok Shop entailed higher investments in Shopee.
Nevertheless, Sea posted its first annual profit in 2023. Sea Ltd clocked a net income of $162.7 million for the year ended Dec. 31, 2023. Its total adjusted EBITDA reached $1.2 billion in the year, showing improvement from the -$878.1 million in 2022.
Sea continues to be profitable on a quarterly adjusted EBITDA basis since Q4 2022.
Despite the healthier balance sheet, Sea shed around 40% of its market value between April 2023 and April 2024. At $55 apiece as of Apr 5, 2024 its shares are nearly 85% down from their Nov. 2021 peak of $357 apiece.
Among the factors weighing on its share price is that Sea Ltd’s e-commerce arm Shopee, has been the most directly impacted by the entry of TikTok Shop in Southeast Asia. As a result, in 2023, Shopee ramped up its promotional activities such as free deliveries and invested more in live streaming to offset the challenge.
“Given the return to losses in Q3 and Q4, it is debatable if the ramp-up in investment was necessary but given the popularity of TikTok Shop, the investment will likely continue,” according to the report.
Grab enters the profitability lane
Grab’s financials stood out last year as it achieved adjusted EBITDA breakeven in Q3 2023—one quarter ahead of the original guidance. It also posted its first profit of $11 million in Q4 2023, compared with a $391 million net loss a year ago.
This year, Grab will face more competition in the delivery segment in Thailand as LineMan looks to launch an IPO in 2024 or even 2025. In Vietnam, too, there is competition in deliveries from ShopeeFood and in ride-hailing from Vinfast, which is looking to create an EV ride-hailing fleet in a JV with Be Group, noted the report.
The market value of super app Grab, which took the SPAC route to the Nasdaq in December 2021, has been more or less flat.
PropertyGuru faces headwinds in Vietnam
Shares of property technology firm PropertyGuru have shed 24% of their value on the NYSE in the past year.
The Singapore-based firm reported a net profit of S$1.1 million ($820,000) in Q4 2023, and a net profit of S$300,000 in Q3 2023. Its revenue increased 3.5% year-on-year to S$41.5 million ($31 million) in Q4 2023. The group’s adjusted EBITDA also increased to S$8.9 million in Q4 2023, from S$503,000 in Q4 2022.
For the full year 2023, the firm posted a net loss of S$15.3 million, down by 88% from S$129.2 million in 2022.
The report noted that the firm faces headwinds in Vietnam. “Since the third quarter [2023], revenues were mainly driven by its core markets of Singapore and Malaysia, with a recovery in Thailand, while Vietnam continued to suffer from government restrictions on property loans… Vietnam is the only market for the platform where revenues are driven by transactional values rather than agency fees, which makes it attractive when transactions are rising but less so during downturns,” it said.
IDX-listed tech firms
With the exception of PT Global Digital Niaga Tbk—the parent company of the Indonesian e-commerce player Blibli, online travel agency Tiket.com, and supermarket chain Ranch Market—shares of most Indonesia-listed companies, too, have fared poorly in the last year.
As of April 2, 2024, e-commerce company Bukalapak’s shares were trading around 40% lower than a year ago, while super app GoTo has shed 37% of its value in the same period.
GoTo hit a positive adjusted EBITDA for the three months ended Dec 31, 2023, at 77 billion rupiah, compared to a negative adjusted EBITDA of 3.1 trillion rupiah in Q4 2022. Meanwhile, its losses in Q4 2023 stood at 80.9 trillion rupiah, a 315% jump from the same period in the previous year. The company said the losses were mainly driven by goodwill reversal as required by prevailing accounting standards following the Tokopedia-TikTok merger.
GoTo’s losses widened by 124% in 2023 to 90.5 trillion rupiah.
GoTo’s “growth expectations for 2024 look slightly muted but there could be more to come once Tokopedia steps up a gear alongside the increased investment in online delivery services (ODS) and fintech”.
In the case of Bukalapak, the company missed its target to achieve adjusted EBITDA breakeven by Q4 2023 but is moving closer to the target. The IDX-listed company posted an adjusted EBITDA loss of 46 billion rupiah in Q4 2023, which is 80% less than the 235 billion rupiah posted in the year-ago period.
However, investor concerns include how it will use its cash pile of 19.4 trillion rupiah. “The company can not pay dividends from IPO proceeds and is restricted on how many shares it can buy back under OJK regulations. This limits its options to reduce its cash making suitable acquisitions a priority. Bukalapak needs to put these funds to work on acquisitions or investors may become impatient,” according to the report.
PT Global Digital Niaga Tbk narrowed its losses in 2023 despite a dip in revenues. Its shares have also risen 3.5% in the last year.
“The company has managed to implement cost-efficiency measures without sacrificing business growth. The key concern for BliBli is how quickly the platform can move the needle toward profitability, given that it has a much smaller cash position than its peers at 462.12 billion rupiah,” the report said.
