In today’s briefing:
- GoTo: Profitability Is a Tall Order and in Need of More Cash to Fuel Growth
- United Tractors (UNTR IJ) – A Commodity Proxy with Substance
GoTo: Profitability Is a Tall Order and in Need of More Cash to Fuel Growth
- GoTo (GOTO IJ) reported 2Q2022 results yesterday. Gross revenue increased 45.4% YoY to IDR5.6trn while operating losses as a % of net revenue increased to 420% from 273.6% in 2Q2021.
- The company expects to make positive contribution margin by 1Q2024E, however, we don’t expect GoTo to make operating profits for the next 3-4 years given its large fixed cost base.
- Reuters reported that GoTo is planning to raise $1bn through convertible bonds. This shows that the company is burning cash to fuel growth but at the cost of margins.
United Tractors (UNTR IJ) – A Commodity Proxy with Substance
- United Tractors (UNTR IJ) represents a well-rounded proxy to higher commodity prices through Komatsu heavy equipment, coal contracting and mining together with gold mining.
- It booked a strong set of 1H2022 results with net profit rising +129% YoY but heavy equipment sales momentum has continued into 1H2022 given there are still supply constraints.
- United Tractors possesses hidden value in Agincourt Resources’ gold reserves, which are worth more than the company’s market cap. Valuations are below historical averages despite the strength of the commodities.
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