Wednesday, 17 June 2015

Morning Mumble: Just Limited (JE.)

Good Morning, 

In a celebration of the completion of the "Menulog" acquisition, Just Eat (JE.) holders have decided to celebrate by selling out. The market may have only just realised that JE. have paid circa 320 times earnings for MenuLog on Monday. That's one hell of an assumption (bet) on growth and ability to beat the competition.

With abstentions from a not insignificant amount of holders, its no wonder the stocks taking a kicking. One assumes those institutional investors in at 425 pence are content to sit on their holding for the longer-term. 

Being anti-most-tech companies especially where they do not improve the sales of a company over the longer-term but more so cannibalise your margins/profits.  Especially after a period of time, the businesses can utilise multiple e-commerce sites, or merely offer a small discount to pay direct in cash/debit card (circa 3-5%), then phase it out when the customers has fully returned to 'normal' transactions.  

So unless Just Eat realise the error of their woes, cut commission/fees and promote a sensible structure, companies are simply going to utilise them for the novelty period and then "just go." .

Although, cash generative for JE. at the moment, the question is, can this be maintained? If you're a business owner and its worthwhile considering the fact that if you don't have Just Eat you're likely to lose a lot less in revenue than what you'll pay in commission. Just Eat's Greedy Commissions Should be Taken Away, Say UK Restaurants

In contrast, the benefits are positive for the end-user,  with simplicity of ordering (resolved by the take-away website) and payment processing (resolvable same). Admittedly JE. offer a portal to manage the system and advertising and targetted emails. Nothing in Just Eat's model is unique or not workable by a savvy businesses wishing to avoid paying an unnecessary premium to conduct business online.  

Finally, as a thought, with "most people" using the same 3-4 take-aways often and varying their order infrequently, what purpose does the Just Eat offer? For around 30% of one months commission, menu's can be placed online with an online ordering portal.

Limited today! 

Atb Fraser



2 comments:

  1. Fraser- Hi- busy outside of markets today and trying to get over Notts losing at Somerset, who were set 401 to win and got them. Grrrrr.

    Re JE. Love em or hate em, the rating is white powder driven - PE around 38 now and when Menulog, which they bought at over 370 x times is incorporated, it will go higher. I wouldn't completely discount the business model, they have gained some traction here but they will remain on a watchlist for me, awaiting for them to either grow into their PE via completely perfect execution (probably needed for at least 2 years) or to have a small stumble and get savaged by the evil shorters. For what its worth, my fair value says £2.66 today. I can see a scenario where they get critical mass and will probably be a buyout target if that happens but I cant price them for that.

    Cheers. The Leggie

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  2. Fraser going against the market with AGA Rangemaster was astute and the best piece of simplicity in analysis seen for some time. Bravo & keep up the 2+2 work a true niche that draws in many to ft alpha markets live they should be paying you!

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