Just Eat Takeaway.com: Global Food Delivery

Last Friday, Just Eat Takeaway.com (JET) announced that the acquisition of GrubHub(GRUB) is approved by GRUB’s stockholders.

This $7 billion deal would be a huge step for JET to enter the US market. After the acquisition, the 2021 annual combined GMV and revenue would reach €28,504 million and €5,039 million, likely to surpass the number of Delivery Hero.

About Just Eat Takeaway.com

Just Eat Takeaway.com (JET) is a Dutch-based platform-to-client food delivery company. Last year, Just Eat and Takeaway.com merged. Now they are a group listed at both the London Stock Exchange and Euronext Amsterdam.

Valuation:

The current price of JET is around €75, and the P/S multiple is around 2.5x to 3.0x. Comparing to other competitors, JET is highly undervalued. Based on a conservative assumption of price multiples and long-term growth rate, the mid target price range is about €115.

However, there are many uncertainties and competitors in JET’s primary market(see Opportunities and Uncertainty section below). If the growth is lower than the expectation, the potential upside for JET would be limited to €90.

Year-end target price range

Target price range by EV/GMV multiple

Target price range by DCF

By my contribution analysis, GRUB can contribute almost 40% of revenue and 50% adjusted EBITDA to the group. A large synergy is required for the group to make positive net income, but the fierce competition in both the US and UK markets is not likely for the group to reduce its expense. There is also a challenge for GRUB to main its market share. GRUB has lost almost 10% of its market shares in 2020.

Financials:

• JET grows fast by the merge and maintains a high gross margin last year. With the high Average Order Value(AOV) and take rate of GRUB, the profitability and efficiency of the group are expected to be improved.
• JET issued €1.1billion in Feb. 2021, which is expected to be used to reinvest in its primary markets.
• A high proportion of Goodwill with low current assets is an unfavored factor of JET. Whether the high non-current assets can create a stable income stream is a key for the group’s future operation.

Forecasted Combined Income Statement

Forecasted Combined Balance Sheet

Opportunities and Uncertainty:

• GrubHub has made positive operating cash flow for recent 3 years and had a higher take rate than others. With economies of scale, this acquisition would provide Just Eat the stable cash streams.
• If GrubHub can maintain around 15% market shares in the US, it can contribute €1.6–1.7 billion of revenue to Just Eat. The potential annual revenue of JET is up to €4.1billion.
• The potential sale of iFood (Brazil delivery brand) to the Dutch tech giant, Prosus N.V., for about €3–4 billion would help Just Eat reinvest in other markets.
• The penetration rate of JET’s main market is still low. There is a large upside potential to grow.

• About 18% of revenue in 2020 was from the German market, but about 67% of adjusted EBITDA was from the market.
• The re-enter of Delivery Hero and the potential expansion of DASH and UBER into Germany will increase the competition.
• 33% of GMV from UK markets, but faced severe competition in with Deliveroo and UBER.

p.s. Prosus now owns 25% shares of Delivery Hero and shares of an Indian Food delivery company, Swiggy. Prosus could be new competitors in the future.

My LinkedIn profile: https://www.linkedin.com/in/shang-hung-chung-1bb164121