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Talabat Holding Plc shares which debuted on the Dubai Financial Market (DFM) on Tuesday opened at AED 1.70, a 6.25% jump from the offer price. After touching a high of AED 1.72, the food delivery platform's stock plummeted to AED 1.43 before closing at AED 1.49, a 13% drop from its opening price.
Recent listings in the Middle East have seen weak aftermarket performance after block-buster IPOs. In November, Lulu Retail Holdings Plc’s shares closed flat after an $1.72 billion IPO on Abu Dhabi Securities Exchange. On Tuesday the stock closed at AED 1.89. In October, Oman’s OQ Exploration & Production dropped 8.2% in its first day of trading on the Muscat bourse from the IPO price of OMR 0.39. On Tuesday, the stock closed at OMR 0.34.
Talabat’s IPO listing started on a strong note but ended cautiously, said Vijay Valecha, Chief Investment Officer, Century Financial.
“Historically, UAE IPOs of state-backed utility companies have delivered strong first-day performances, often encouraging investors to bet on quick profits. However, recent debuts by private players like Lulu, Al Ansari, and Spinneys have shown muted movements around their offer prices, failing to sustain the trend of first-day gains or gap-up openings. This shift may have influenced investor sentiment and led to profit-booking activity. After the price fell below the offer price of AED 1.60, a few retailers may have likely closed their positions, avoiding the potential of further losses, explaining today’s low of AED 1.43."
The MENA unit of the Berlin-based food delivery company Delivery Hero, floated 20% of its issued share capital raising AED 7.5 billion in an IPO which was the largest in the GCC region this year. The offering saw strong subscription with books covered at the top of the range within half an hour of opening. Investor interest was so strong that Delivery Hero upsized the offering by 5%.
Strong fundamentals
Despite the disappointing debut, Talabat's strong fundamentals and market-leading position in the online food and grocery delivery space could provide some support to prices, Valecha said. Revenue for 2023 stands at AED6.16 billion (up 21% over the previous year), and the net profit is AED1.08 billion (up 40%). The price-to-sales multiple of Talabat at the top end of the range is 6.04, and P/E is 34.5 based on 2023 earnings. The company's business segments are online food ordering, delivery, takeaway and groceries, and convenience retail marketplace in the MENA region, with operations in the UAE, Kuwait, Qatar, Bahrain, Egypt, Oman, Jordan, and Iraq. Talabat GMV in 2023 is $6.1 billion, while the category size in the countries operating for food service and retail is $274 billion.
“So, there is significant potential for growth. Considering Talabat's current growth and potential to maintain high growth for an extended period, its valuations are not expensive. Moreover, it is a market leader in the geographies where it operates. Additionally, It's worth noting that the company has a net profit margin of 17.53%, which is much higher than the single-digit margins of its peers in other geographies.”
Delivery Hero, Talabat's German parent which still holds 80% stake in the Middle Eastern subsidiary saw its share price fall 11% on Tuesday on the Frankfurt bourse where it trades. This underperformance can mainly be attributed to the rising cost pressures faced by the firm, with Talabat's negative performance on debut adding pressure, he said.
(Reporting by Brinda Darasha; editing by Seban Scaria)
