To The Moon

Bytedance will combine its Indonesian TikTok shop business (which has a 5% market share in 2022) with GoTo’s e-commerce unit Tokopedia, as released in a statement on Monday (11 Dec) by both companies.

With the new combination, TikTok will have a controlling 75% stake in that combination, which will run the shopping features of TikTok’s social media app in Indonesia.

TikTok is using this deal to revive its online-shopping service in Indonesia, Southeast Asia’s largest retail arena. In September, Indonesia has announced regulation which has force TikTok to separate their payments from shopping. This announcement has TikTok to stop their ecommerce service which was gaining traction against competitors like $Sea Ltd(SE)$ and $GOTO GOJEK TOKOPEDIA TBK PT(GTOFF)$

Southeast Asian E-Commerce Market

The report calculated the revenues of Southeast Asian countries’ e-commerce business through the accumulation of the purchase value – also referred as Gross Merchandise Value (GMV) – among the existing marketplaces.

In 2022, the total revenue from e-commerce in Southeast Asia has reached $99.5 billion. Indonesia’s e-commerce businesses make up 52% of the total, followed by Thailand (14.4% or $14.4 billion), the Philippines (11.5% or $11.5 billion), Vietnam (9% or $9 billion), Malaysia (8.7% or $8.7 billion), and Singapore (4% or $4 billion).

Indonesia E-commerce Market Size Growth (2023 to 2028)

Indonesia stood the tallest among other Southeast Asian countries with US$51.9 billion, or around Rp 778.7 trillion, in e-commerce business revenue in 2022, according to a report "Ecommerce in Southeast Asia 2023" by Singapore-based research and venture builder firm Momentum Works.

The Indonesia E-commerce market has a market size (2023) of USD$52.93 billion, it is projected to have a CAGR of 10.40% to a market size (2028) of USD$86.81 billion.

Six marketplaces lead the pack among other contributors to Indonesia’s GMV. Shopee by Sea is ranked first with 36% with around 18.6 billion for Indonesia’s purchase value from e-commerce users.

Tokopedia by GoTo cames in second with 35% with around 18.1 billion, with the combination with TikTok Shop which is 5% with around 2.5 billion, we could see this combination overtake Shopee as the leader in 2024.

$KKR & Co LP(KKR)$ ByteDance Investor

With the Indonesian government signaled that it is approving TikTok and GoTo’s new pact after it sought to protect Indonesia local competitors consisting of tens of millions of its smaller enterprises.

ByteDance owned TikTok Shop which is fastest-growing entity for its group of companies, they have been seeking new revenue sources beyond its popular social media service.

TikTok shop has started in Indonesia in 2021 and by 2022, it has garnered 5% of GMV, this has provided confidence and encouragement to expand into online retailing in other markets, including the US.

Now that this pact is approved, it looks like GoTo is looking beyond competition to local market, to its greater to push into international market with TikTok. This would be a win-win for both Bytedance and GoTo.

We would not be able to invest in TikTok or Bytedance in the U.S. market, but I would look at investing in KKR, who has been an investor of Bytedance since its early day.

FS KKR Capital is trading at a 20% discount to net asset value despite strong growth in net investment income in the last year.

The BDC has a well-diversified portfolio focused on senior secured loans and a joint venture with similar assets. The dividend is well-supported by NII, but there is a risk from the Fed ending its tightening policy.

I believe with this new pact from TikTok (bytedance), I would expect a better performance to KKR.

Summary

Based on what we have seen from the data I have collected, it looks like there is a chance that KKR would benefit from the market share from TikTok pact with Tokopedia.

Shopee would be a stock we could avoid for now, I would be monitoring KKR closely as this would be a good price entry with FS KKR Capital is trading at a 20% discount to net asset value.

Appreciate if you could share your thoughts in the comment section whether you think KKR would benefit from the TikTok pact with Tokopedia.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.