Marketplace-driven results. BUKA booked revenue of IDR 1.2 trillion in 2Q23 (+17% qoq, +30% yoy); the growth was driven mainly by its marketplace (IDR 1.2 trillion, +21% qoq, +254% yoy) and O2O businesses (IDR 1.0 trillion, +13% qoq, -21% yoy). The same marketplace-driven growth happened with both its TPV and take rate; BUKA booked a consolidated TPV of IDR 41 trillion (+2% qoq, +13% yoy), supported by the increase in its marketplace TPV (IDR 44.3 trillion, +4% qoq, +20% yoy). BUKA’s overall take rate also rose to 2.86% in 2Q23 (+0.37 bps qoq ,+0.39 bps yoy), driven by the increase in its marketplace take rate (+93 bps yoy, +64 bps qoq to 3.02%). Cumulatively, BUKA posted revenue of IDR 2.2 trillion in 1H23 (SSI: 45.8%, Cons: 47.1%) with a net loss of -IDR 389 billion.

Gearing towards positive adjusted EBITDA. One thing that caught our eye from BUKA’s FY22 results was its CM; BUKA managed to post positive CMs for three consecutive quarters, allowing the company to book a positive full-year CM of IDR 228 billion. Should this trend continues, we believe BUKA might be able to book a positive adjusted EBITDA in 4Q23, though its full-year adjusted EBITDA might still be negative (FY23F projection: -IDR 134 billion). BUKA will also boost its remittance business line and is hopeful of gaining a lot of traction to boost its Mitra revenue in 2H23. Regarding its specialty stores initiative, BUKA has make plans to amplify its OEM initiative, which is projected to have a relatively higher take rate than its e-commerce business. Bear in mind that specialty vertical, despite contributing only 10-15% of marketplace TPV, has a high take rate nature due to its 1P nature, providing room for further monetization and improving profitability.

Remain confident, though slight adjustments are needed. We still pick BUKA as our clear favorite in the tech sector due to its abundant cash reserves and its efforts to look for organic and anorganic growth. We still maintain our confidence that BUKA will book a positive adjusted EBITDA in 4Q23, even though our overall EBITDA projection for FY23F still shows a loss (-IDR 134 billion). Nevertheless, due to slower TPV growth and lack of plans for further acquisition that might help boost its specialty stores initiative, we lower our revenue and net loss projections for FY23F and FY24F to IDR 4.5/5.4 trillion and -IDR 255/-174 trillion, respectively.

BUY, TP IDR 310. As we roll over our valuation to FY24F, we reiterate our BUY rating on BUKA, albeit with a lower TP of IDR 310, implying 3.5x FY24F EV/Sales. BUKA is currently trading at 1.7x FY24F EV/Sales (62% discount to its global and regional peers). Main Risks: Lower-than-expected TPV and execution risk.