Recommendation: Strong Buy (No Change)
Price:
€--
3m ADV:
$50m
Price Target:
€--
Market Cap:
€6.7bn
Forecast Return:
~240%
Ticker:
TKWY NA
Investment Thesis
- Founder-led business with a long-term track record of strong execution, desirable business model and long term structural growth.
- Sentiment is at all-time lows due to a rapid expansion into logistics and fee caps in North America.
- Significant value in JET’s iFood investment could be equivalent to +50% of its current market cap if iFood continues to execute as it has to date.
- We see ~240% upside potential to a target price of €–.
In this short note we report on our recent experience as a JET scoober driver, and summarise our key takeaways.
Key Takeaways
- Fast food orders are clearly a material amount of JET’s orders for the Oval London hub that we attended, which is likely indicative of Just Eat overall. From our experience, and from chatting to drivers, McDonald’s (No Current Recommendation – NCR) alone could account for a third of all orders, implying quick service restaurants (QSRs) could represent 40% of all of JET’s orders (once you include KFC, Greggs [NCR], etc.).
- This high proportion coming from QSRs is perhaps not surprising given JET has rapidly grown its logistics business in the UK. A clear focus over the next few years will be to grow the number of deliveries from smaller franchises and independents where a higher take rate can be charged, as, although QSRs help with the network effect, it is hard to see how JET can make money on these orders. Taking McDonald’s, for example, we estimate the take rate is ~15% (relative to +25% for smaller chains), and at the moment, consumers will pay – at most – a couple of euros for delivery. Generously assuming ≈€15 average transaction value, that leaves ≈€4.3 revenue for JET relative to ≈€6.5-7.5 to fulful the order (assuming limited pooling).
- We managed to achieve 2.2 drops per hour during our time. Interviewing staff suggested that the average at this hub is below 2, once you include the time travelling to and from the hub. However, this has materially improved over the last 12 months. Realistically, to get above 2, the obvious areas that would need to change would be:
- reducing wait time at restaurants
- pooling more orders
- further optimisation of the algorithm and website
- Drivers get £10.20 per hour + a £0.25 bonus per delivery, which rises to £1.50 on Friday–Sunday evenings. The employees are technically employed through Ranstad, and once you include the employer, national insurance contributions, holiday allowance and insurance, we estimate the fully costed wage per hour is approaching £15.
