BELI - Capitalize omnichannel opportunity

BELI is expected to be a beneficiary of strong recovery post-pandemic, marked by normalized mobility and pick-up in consumer spending especially in 2Q23 in conjunction with holiday season, on top of its efforts to strengthen logistics and O2O brand partnership. Initiate BELI with a BUY, assigning target price of IDR559/ share. Boost from strengthened logistic infrastructure BELI is currently on-progress of building a new giant warehouse in Marunda Center, Bekasi, expected to be fully operational in 2024. The warehouse will also be situated in strategic position with access to Tj. Priok Seaport and Soetta Airport on 10 ha of land. The company expects that the green concept warehouse to be able to house c. 2mn items in capacity, in which will become central of supply chain and fulfillment. With addition of such strong infrastructure, we believe BELI will be able to optimize its fast-dispatched feature, Blibli Express Service (BES) and other 3PLs, amid growing trend in quick commerce, and thus encouraging more transaction. Furthermore, the company also enhances monobrand outlet line-up through the launch of ‘Hello’, Apple authorized reseller, marked with opening of 4 new outlets and aiming for 7 more this year, while incorporating it to its click and collect feature. We are sanguine this brand inclusion will improve its TPV and margins given Apple’s solid branding in mid-tohigh customers that BELI is also intending to tap. Capturing strong recovery momentum We expect to see BELI's TPV to pick-up in 2Q23, boosted by school holiday season in JuneJuly, beside Eid holiday in April. This is especially ensuing government's announcement to move into endemic phase, which is expected to be followed by continuous pick-up in travel and spending. On top of that, consumer confidence index (IKK) pointed out to higher optimism at 128.3 in May from 126.1 in April with durable goods purchase index rising compared to festive holiday season. Efficiency efforts yield fruitful result BELI has shown substantial improvement on monetization efforts, reflected by higher take rate at 4.9% in 1Q23, compared to 3.7% in 4Q22. The take-rate bump mostly comes from 1P that stood at 6.9% in 1Q23 compared to 3.8% in previous quarter, followed by institution segment. However, the company's higher take rate comes with declined TPV 13.8% qoq in 1Q23 to IDR17.92 tn, on the back of seasonality, in our view. Improved monetization also was also exhibited by lower discount & promotion, especially for 3P segment that mostly came from Tiket.com, which stood at 1.6% to TPV in 1Q23 compared to 2.2% in 4Q22, as part of BELI’s attempts to capitalize mobility normalization. Initiate with BUY on better monetization and eased restrictions We initiate coverage on BELI with a BUY, assigning target price of IDR559 per share. Note that our price target implies 2023F P/TPV at 0.6x and P/gross revenue at 3.4x. We consider the company’s integrated online-offline networks coupled with lifestyle and travel arm, Tiket.com to be its strongest point of advantage and primary beneficiary of transition to endemic phase. In addition, we also note that BELI’s better monetization capitalized from physical stores will serve as a positive catalyst for its performance going forward.