Bukalapak’s business model has shifted - so have its numbers

Opening Bell 🔔 is Tech in Asia’s free newsletter that brings you the biggest news and latest trends around Asia’s publicly listed tech companies. [Read from your browser]( Opening Bell 🔔 Welcome to the Opening Bell! Delivered every Monday via email and through the Tech in Asia website, this free newsletter breaks down the biggest stories and latest trends on Asia’s publicly listed tech companies. If you’re not a subscriber, get access by [registering here](. --------------------------------------------------------------- Written by Simon Huang Journalist Hello {NAME} Pivots are part and parcel of life. I’ve done it a couple of times professionally, moving from law to investment banking and then to tech/financial journalism. You don’t always get it right. Sometimes you fall flat on your face, but you also usually come out stronger. Companies have to pivot, too. Many do so under the glare of public markets. For example, Netflix (NFLX, NASDAQ) famously transitioned from being a mail-order DVD service to a streaming giant. Others have been less successful. Zillow (ZG, NASDAQ) tried to use the data it collects from its property listings business to go into [instant home buying (ibuying)]( - hoping to profit from flipping houses on its own. However, the data was less accurate than expected, leading Zillow to overpay for houses and [lose big](. Wider market turbulence and its withdrawal from the ibuying business have sent Zillow's shares down 85% since their peak in February 2021. Similarly, Indonesia's Bukalapak (BUKA, IDX) has had to pivot its business, though perhaps in a less dramatic fashion. Bukalapak started out in 2010 as an ecommerce platform. However, in 2017, the company launched its Mitra business, an online-to-offline solution to help small retailers (called warungs) in Indonesia procure physical goods to sell. As my colleague Aditya explores in [this week’s Big Story]( Mitra has grown tremendously since then, and it now accounts for a majority of Bukalapak’s revenue. This has helped the company continue posting strong revenue growth, despite its marketplace losing some ground to rivals Tokopedia and Shopee in Indonesia. The Mitra business model also has a different cost structure from the consumer marketplace model. This has made a positive impact on Bukalapak’s expenses and bottom line, which Aditya analyzes more thoroughly in the story. For now, Bukalapak’s pivot appears to be a success. Yet it cannot rest on its laurels, as many other players try to carve out their piece of the pie. -- Simon  ---------------------------------------------------------------  THE BIG STORY [Mitra has flattered Bukalapak’s financials, but new challenges await]( Bukalapak's dependency on third parties in sourcing products and delivering goods may hinder the growth of its O2O business, analysts said.  ---------------------------------------------------------------  3 TRENDS TO KEEP AN EYE ON Hot stocks, earnings reports, restructuring, pressure from activist investors, and more. 1️⃣ The fate of Tencent’s investment portfolio: Tencent (0700, HKG) has [denied]( a report by the Wall Street Journal saying that the tech firm intends to repurchase its shres by selling off its investments in companies like Didi, Meituan (3690, HKG), and KE Holdings (2423, HKG). Over the years, Tencent - owner of ubiquitous social media app WeChat - has built up a portfolio consisting of stakes in other listed tech companies, including Sea (SE, NYSE), Kuaishou (1024, HKG), and Snap (SNAP, NYSE). After announcing it was [distributing]( most of its shares in JD.com (9618, HKG) to its shareholders, Tencent sold US$3 billion worth of Sea shares [earlier this year](. As shareholders like Prosus (PRX, AMS), which owns over 28% of Tencent, is in the process of selling down its stake, the Chinese tech behemoth's shares are under pressure. Regardless of its actual intentions, Tencent will do well to deny talk of a sale, since it would only add to the selling pressure on the shares in its portfolio companies and further erode their value. These reports of divestments encapsulate several major trends affecting the global economy: rising interest rates, Beijing's crackdown on the tech industry, and escalating tensions between China and the West. Yet Tencent also recently [raised its stake]( in Ubisoft (UBI, EPA), France’s biggest game developer. This suggests it is still willing to invest, but with greater focus on core business areas such as gaming. Will these changes help its flagging share price? It’s going to be tough for Tencent to fight the incredible macro headwinds of recession and rising interest rates, especially since it mostly owns stakes in other tech companies, whose shares have also fallen from favor. 2️⃣ Chinese tech giants diverge on going public: Tencent peers Ant Financial and ByteDance are yet to list. The suspension of Ant’s IPO by China's regulators in late 2020 was the first public sign of the brutal crackdown on Chinese tech companies that was to follow. Yet [reports]( that the company had won the rights to a plot of land in Shanghai, where it plans to build 60,000 square meters of office space, have fueled speculation that an IPO may be back on the cards. However, before popping out the champagne (or moutai?), some circumspection is needed. As a result of reforms demanded by regulators (holding more capital, curbing consumer lending, etc.) and the broader aversion to tech in the market, Ant is estimated to be worth around [US$70 billion]( - just a fraction of the US$330 billion it was aiming for in the lead-up to its aborted market debut. That’s quite a step down. But current investors should be glad to see the liquidity that an IPO brings - they can always choose not to sell if they’re unhappy with the valuation. Meanwhile, TikTok maker ByteDance is reported to be [buying back US$3 billion]( in shares from current investors at a valuation of around US$300 billion, even though its listing plans were recently shelved. ByteDance is moving beyond social media, expanding into new verticals like ecommerce in Southeast Asia and food delivery in China.  See also: [Tracking layoffs across Asia’s startup ecosystem (Updated)]( If ByteDance doesn’t need the money, then staying private makes sense for now. If it executes its plans well, it can expect a higher valuation when markets eventually recover their appetite for tech stocks. 3️⃣ US SPACs - Chamath throws in the towel: Labeling yourself “the Warren Buffet of [your] era,” as former Facebook executive-turned-tech investor and special purpose acquisition company promoter Chamath Palihapitiya [reportedly]( did, is an indication of a healthy ego. But it also usually sets an individual up for a huge fall. The crows seem to have come home to roost as Palihapitiya announced that he was returning US$1.5 billion to investors in two of his SPACs, which failed to find acquisition targets before a regulatory deadline lapsed. This, from someone who claims to have evaluated “more than 100 targets.” SPAC investors have to approve any proposed acquisition. Otherwise, they can choose to get their money back. Perhaps Palihapitiya saw the writing on the wall. More importantly, what does this tell us about founders’ expectations? Private-market valuations invariably track the public market, but there is often a lag. Does the inability to close a deal indicate a disconnect between what founders think their companies are worth and what the public markets are willing to pay?  ---------------------------------------------------------------  2 EYE-POPPING FACTS Tech in Asia scours the internet to bring you head-turning numbers from the world of business. [US$7.75 billion]( - That’s how much first-time share sales in Hong Kong raised this year - 7% of the total for Asia and the lowest share since 1999. In stark contrast, companies listing in Shanghai and Shenzhen have raised US$74.5 billion. [4.6%]( - The US Federal Reserve expects to raise rates to around 4.6% in 2023, meaning that more interest rate hikes are in store this year and the next. This comes after the most recent 0.75% hike saw rates climb to between 3% and 3.25%.  --------------------------------------------------------------- THE ONE YOU DIDN'T SEE COMING We spotlight the unusual, not-your-everyday kind of story that had everyone talking and social media buzzing over the past week.  Oyo challenges its investor on valuation India’s Oyo is looking to revive its stalled IPO plans, but SoftBank, one of its main backers, may have thrown a spanner in the works by [cutting its internal valuation]( of the travel startup by 20% to US$2.7 billion. An Oyo spokesperson has called this devaluation “patently incorrect.” Perhaps the Japanese tech investor really is being more cautious about valuations. But it is rare to hear anyone complaining about SoftBank being too conservative.  --------------------------------------------------------------- That’s it for this edition - we hope you liked it! Not your cup of tea? You can unsubscribe from this newsletter by going to our preference center at the bottom of this email. Happy investing and see you next week! Disclaimer: This content is for informational purposes only. Kindly do not construe any such information as legal, tax, investment, financial, or other advice. [ADVERTISE]( | [SUBSCRIBE]( | [HIRE]( | [FIND JOBS]( P.S. Don't miss out on the biggest tech news and analysis. Add newsletter@techinasia.com to your address book, contacts, or safe sender list. Or simply move us into your inbox. Too many emails? Switch to a different frequency or get new content through our [preference center]( or [unsubscribe](. 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