Just Eat poised to enter FTSE 100 index

The UK's penchant for takeaway food may propel restaurant delivery firm Just Eat into the benchmark FTSE 100 stock index after surging more than threefold since its April 2014 initial public offering.

Just Eat’s market capitalisation of about £5.6 billion (€6.3bn) may qualify the stock to enter the FTSE 100 index next month, the London Stock Exchange Group said on Monday.

The London-based company has leapfrogged supermarket chains J Sainsbury and Wm Morrison Supermarkets along the way. Its meteoric rise has come despite stiff competition from much larger rivals Amazon.com and Uber Technologies, the loss of two top executives within months and the regulatory rigor that comes with an upstart shaking up traditional markets. Not to mention the confidence-eroding political backdrop of Brexit.

“Just Eat appears to be growing the market when it comes to food deliveries, with the simplicity of ordering and payment, alongside increased choice and a ratings system, meaning people are increasingly likely to order in rather than head down to their local supermarket to buy ingredients,” said Joshua Mahony, a market analyst at IG Group Holdings in London.

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The company’s low overheads “stand in stark contrast to the huge requirements and costs associated with a nationwide supermarket”.

Outperformed

Researcher NPD Group estimated in March that the delivery market in Britain was worth £3.6 billion (€4bn) last year, almost 50 per cent more than in 2008. NPD sees British consumers spending a further £656 million (€743m) on food delivery by 2019, the researcher said on November 15th.

Just Eat’s stock has equally outperformed restaurant operators such as Comptoir Libanais owner Comptoir Group and Franco Manca owner The Fulham Shore, which have reported a slowdown as British consumers’ confidence in the economy steadily declined since last year’s vote to leave the EU.

Contributing to its success is the company’s market-leading position in all 12 of the countries in which it operates, adding a defensive trait as consumers seek sites with the biggest range of listings, Liberum analysts Ian Whittaker and Annick Maas said in a report earlier this month.

"Market leaders among online takeaway ordering platforms, similar to the classified portals, benefit from network effects," the analysts said, initiating coverage with a buy recommendation. "Being number one in a market is key to the business's ongoing success." – (Bloomberg)