Tuesday, 27 October 2015

Just Eat (JE/) ... more fine dining than Grub?

Tuesday 27th October 2015

Pursuant to today's warning by the US listed online restaurant order and delivery service, GrubHub (GRUB US, mkt cap $2.2 billion), I sold short a few Just Eat (JE/ LN, mkt cap £2.9 billion), the UK listed online restaurant order and delivery service. 

This was not a difficult decision to make. 

You may reckon that JE/ with its superior market capitalization to GRUB is as distinguished in terms of its prospective P&L. However, this is not the case. 

For sales:
  • GRUB is forecast* to achieve £237 million in sales in 2015, rising 29% to £305 million in 2016. 

by contrast
  • JE/ is forecast* to achieve £235 million in sales in 2015, rising 34% to £315 million in 2016.

In terms of EBITDA and EBIT:
  • GRUB is expected* to deliver £72/44 million in EBITDA/EBIT in 2015, rising to £96/63 million EBITDA/EBIT in 2016. 

while
  • JE/ is penciled* in for £55/48 million in EBITDA/EBIT in 2015, rising to £89/83 million in EBITDA/EBIT in 2016. 

The major difference between the two companies appears to be in valuation:
  • GRUB trades* on 40x this year's earnings, falling to 31x 2016. Or alternatively an EV/EBITDA multiple of 16.9x 2015 falling to 12.7x 2016.

as compared to
  • JE/ trading* on 76x this year's earnings, falling to 47x 2016. Or alternatively an EV/EBITDA multiple of 49x 2015 falling to 30x 2016. 

*Bloomberg consensus

So what gives? 
I reckon one set of valuations is wrong. US investor appetite would suggest it's Just Eat's. 

Consequently I sold short. 

GRUB share price as compared to JE/
Source: Bloomberg
GRUB P/E de-rating as compared to JE/
Forward P/E multiple
Source: Bloomberg
GRUB EV/EBITDA de-rating as compared to JE/
Forward EV/EBITDA multiple
Source: Bloomberg

And another thing

GRUB's warning (and subsequent slide in value) is probably unhelpful for any positive read across to Foodpanda, which no doubt explains why Rocket Internet fell 6% on the day. 

Disclaimer: The information, discussions or topics referred to on this blog should in no way be considered “advice” to buy or sell anything. The information which may be referred to is freely available in the public domain and where required the source of information is referenced to for verification. While every effort has been made to ensure the veracity of any information contained within this blog, the author accepts no responsibility for the accuracy of any information contained within this blog or for the sources of information which may be referred to. Readers are responsible for their own actions and interpretation of the information contained within this blog.

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