Online takeaway food ordering system Just Eat (JE.) jumps nearly 10% on its market debut to 284.18p. This is despite the company having already priced its IPO at the top end of the range thanks to strong investor demand. The moot point is the valuation.


Just Eat made £14.1 million underlying earnings before interest, depreciation and amortisation (EBITDA) in 2013. The 260p placing price values Just Eat at just under £1.5 billion, so it is effectively trading on 104 times underlying earnings.


As a concept, Just Eat is very appealing. It accounts for approximately half the UK online takeaway market. With more and more people using tablets and smartphones to order goods, as this is far more convenient than having to go to a desktop PC, pick up the phone or walk/drive to the shops, Just Eat is the perfect solution to countless small businesses by providing a platform on which to accept online orders.


Investors clearly recognise this appealing business model, together with the growth potential by offering a 'click and collect' facility for restaurants/cafes that don't have the ability to deliver food. You'll soon be able to make an order online and then pop to your local food establishment to collect the order when it is ready.


But it is worth an investment? It has a first mover advantage but arguably there's no barriers to entry. Anyone with cash could set up an identical business and undercut Just Eat. For now, it is clearly in a sweet spot with potential overseas expansion, but as a long-term business it may need to evolve into something more substantial to keep investors happy.


Trading for the next few days will be restricted to institutional investors who took part in the IPO. Unconditional dealings – namely the point at which the public can trade the stock – starts on 8 April.

Issue Date: 03 Apr 2014