ASEAN Internet: Xanh SM’s Foray into Indonesia and the Impact on Market Dynamics

Broker: Maybank Research Pte Ltd

Date: December 5, 2024

In the evolving landscape of ASEAN’s internet and mobility sector, Maybank Research Pte Ltd provides an in-depth analysis of Xanh Smart Mobility’s (Xanh SM) strategic expansion into Indonesia. This comprehensive report evaluates the implications of Xanh SM’s entry on existing market leaders, Grab and GoTo, and offers a detailed examination of related companies such as Sea Ltd and Bukalapak.

Xanh SM: A Green Revolution in Mobility

Xanh SM is set to launch its operations in Indonesia by mid-December 2024, marking it as the first 100% electric vehicle (EV) taxi company in the country. Positioned strategically between traditional operators like BlueBird and digital hailing giants such as Grab and GoJek, Xanh SM aims to carve a niche with its all-new EV fleet. Initially starting with 600-1,000 vehicles, the company plans a rapid expansion to 3,000 units shortly, with an ambitious target of 16,000 vehicles by 2025-26, pending regulatory approvals.

Xanh SM’s appeal lies in its commitment to green mobility, quality service backed by extensive driver training, and lucrative driver incentives offering commissions of 45-55%. The company’s pricing strategy is competitive, with a flag fare of approximately IDR9,600 and a rate of IDR5,800 per kilometer, which positions it as a premium option but potentially attractive due to promotional offerings during its introductory phase.

Impact on Grab and GoTo

The entry of Xanh SM is poised to disrupt the market dynamics in Indonesia. Current data from November 2024 indicates that Grab and GoTo have adjusted their pricing, with average fares at IDR5,154 and IDR4,297 per kilometer, respectively. Xanh SM’s higher pricing could be mitigated through strategic promotions, potentially capturing up to 7% of the market share by 2027. This competitive pressure is anticipated to impact the Gross Merchandise Value (GMV) of Grab and GoTo, with estimated reductions of 0.3% to 0.6% for Grab and 1.5% to 3.3% for GoTo over 2026-27.

Sea Ltd: Navigating Opportunities

Sea Ltd, with a robust market capitalization of USD 66,134 million, receives a ‘Buy’ recommendation with a price target of 125.00, suggesting a 7% upside potential. The company is poised for growth with projected price-to-earnings (P/E) ratios of 97.7 in 2024, indicating strong future earnings potential. Sea Ltd remains a key player in the digital space, leveraging its extensive ecosystem to capitalize on regional internet trends.

Grab Holdings: A Strategic Position

Grab Holdings is recommended as a ‘Buy’ with a target price of 6.20, reflecting a 16% upside. Despite current non-material earnings (nm) in 2024, the company shows promising prospects with a P/E ratio of 82.4 in 2025. As Grab navigates the competitive landscape, its strategic initiatives are expected to maintain its leadership in the ride-hailing and digital services market.

GoTo: Aiming for Growth

GoTo is also rated as a ‘Buy’ with an ambitious target price of 105.00, highlighting a 40% upside potential. The company’s focus remains on expanding its market share and enhancing its service offerings to sustain growth in the highly competitive internet services sector across Indonesia and the region.

Bukalapak: A Resilient Contender

Bukalapak, with a market cap of USD 796 million, is positioned as a ‘Buy’ with a target price of 145.00, indicating an 18% potential increase. With P/E ratios of 17.4 and 17.9 for 2024 and 2025, respectively, Bukalapak is expected to deliver consistent performance, leveraging its strong e-commerce platform.

Conclusion

The ASEAN internet landscape is witnessing significant shifts with Xanh SM’s entry into Indonesia. This move not only challenges existing players like Grab and GoTo but also underscores the broader trend towards sustainable and innovative mobility solutions. As companies like Sea Ltd and Bukalapak continue to strengthen their positions, the region remains a dynamic and lucrative market for technological advancements and strategic growth opportunities.