Asian Equities Analyst, Logistics & Transport, Tracking Traffic

Daniel Hellberg

Asian Equities Analyst, Logistics & Transport

Tracking Traffic

Focusing on Asian logistics, transportation, and travel companies

Equity Capital Markets

In a new filing on Monday, US online food delivery giant DoorDash disclosed additional details of its planned IPO. The company hopes to sell 33 mn new shares at between US$75 and US$85 per share, raising over US$2.4 bn and valuing the company at US$25 bn or more. In this note we compare it to other listed online food delivery firms, and discuss which factors could justify either higher valuation multiples (strong revenue growth) or lower valuation multiples (US restaurant closures) versus global peers.

In a new filing on Monday, US online food delivery giant DoorDash disclosed additional details of its planned IPO. The company hopes to sell 33 mn new shares at between US$75 and US$85 per share, raising over US$2.4 bn and valuing the company at US$25 bn or more. In this note we compare it to other listed online food delivery firms, and discuss which factors could justify either higher valuation multiples (strong revenue growth) or lower valuation multiples (US restaurant closures) versus global peers. 

DoorDash IPO: First Take on Proposed IPO Price Range of US$75-85 Per Share

Japan/Asia Long-Short, LightStream Research

Mio Kato

Japan/Asia Long-Short

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

DoorDash is joining the long list of unprofitable companies touting revenue growth and the now customary “contribution margin” improvement as reasons to favour their stock. The timing is opportune given a nice boost to demand from lockdowns and the punchy looking growth numbers that have been the result of this. However, there are some concerns as well. Below we examine the company’s business model and flag some interesting points in the S-1.

DoorDash is joining the long list of unprofitable companies touting revenue growth and the now customary “contribution margin” improvement as reasons to favour their stock. The timing is opportune given a nice boost to demand from lockdowns and the punchy looking growth numbers that have been the result of this. However, there are some concerns as well. Below we examine the company’s business model and flag some interesting points in the S-1.

DoorDash IPO – Unprofitable Despite Pandemic Boost

US-based online food delivery company <a href="https://www.smartkarma.com/entities/doordash-inc" target="_blank" data-smartkarma-citation="entities:28881:1" rel="noopener">DoorDash Inc (0881510D US)</a> has filed to go public. In this note we describe the company's operations and compare its scale and efficiency to other online food delivery companies in the US and around the globe. 
Intensely focused and increasingly dominant in its home market, DoorDash has made admirable progress toward profitability by focusing on smaller cities and suburban areas in the US. This approach is the opposite of conventional wisdom, which suggests that only a handful of large US cities can generate the order density necessary to make online food delivery economically viable. 
DoorDash is seeking growth from new market segments adjacent to its core operation even as it faces the threat of a large, disruptive new entrant in US online food delivery. Last valued at US$16 bn in June 2020, we believe DoorDash's unorthodox approach deserves to be thoroughly understood by investors. We will write more about DoorDash as the IPO process moves forward.

US-based online food delivery company DoorDash Inc (0881510D US) has filed to go public. In this note we describe the company's operations and compare its scale and efficiency to other online food delivery companies in the US and around the globe. 
Intensely focused and increasingly dominant in its home market, DoorDash has made admirable progress toward profitability by focusing on smaller cities and suburban areas in the US. This approach is the opposite of conventional wisdom, which suggests that only a handful of large US cities can generate the order density necessary to make online food delivery economically viable. 
DoorDash is seeking growth from new market segments adjacent to its core operation even as it faces the threat of a large, disruptive new entrant in US online food delivery. Last valued at US$16 bn in June 2020, we believe DoorDash's unorthodox approach deserves to be thoroughly understood by investors. We will write more about DoorDash as the IPO process moves forward.

DoorDash IPO Context: What It Is & How It Compares to Online Food Delivery Universe

Equity Bottom-Up

Maintaining strong revenue growth at the online food delivery companies largely depends on some combination of rising orders, increasing value per order, and higher monetization ('take') rates. 
And improvement in gross profitability at these companies depends on getting unit delivery revenues to grow faster than unit delivery costs. 
In our view, many of the drivers of recent strong revenue growth and improving gross profitability are beginning to fade for some online food delivery companies, including China's Meituan. 
This decline can be obscured by a number of temporary factors. At <a href="https://www.smartkarma.com/entities/meituan-dianping" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan (3690 HK)</a> in 2020 these include a change in segment reporting, a sharp rise in 'other' operating income, and growth of  the company's food delivery advertising revenue. 
In this note we take a closer look at H1 2020 food delivery results from Meituan, <a href="https://www.smartkarma.com/entities/delivery-hero-se" target="_blank" data-smartkarma-citation="entities:24416:1" rel="noopener">Delivery Hero SE (DHER GY)</a> and newly merged <a href="https://www.smartkarma.com/entities/takeaway-com-nv" target="_blank" data-smartkarma-citation="entities:28360:1" rel="noopener">Takeaway.com NV (TKWY NA)</a> to see how each company is faring in terms of top-line growth and gross profitability. The numbers are mixed, but in Meituan's case show a waning of momentum and stagnant margins in core food delivery activity.

Maintaining strong revenue growth at the online food delivery companies largely depends on some combination of rising orders, increasing value per order, and higher monetization ('take') rates. 
And improvement in gross profitability at these companies depends on getting unit delivery revenues to grow faster than unit delivery costs. 
In our view, many of the drivers of recent strong revenue growth and improving gross profitability are beginning to fade for some online food delivery companies, including China's Meituan. 
This decline can be obscured by a number of temporary factors. At Meituan (3690 HK) in 2020 these include a change in segment reporting, a sharp rise in 'other' operating income, and growth of  the company's food delivery advertising revenue. 
In this note we take a closer look at H1 2020 food delivery results from Meituan, Delivery Hero SE (DHER GY) and newly merged Takeaway.com NV (TKWY NA) to see how each company is faring in terms of top-line growth and gross profitability. The numbers are mixed, but in Meituan's case show a waning of momentum and stagnant margins in core food delivery activity.

Meituan: Key Drivers of Top-Line Growth &  Margin Lift Receding, Obscured By Growth of 'Other' Items

Equity Analyst, LightStream Research

Aqila Ali

Equity Analyst

It was reported on last week that <a href="https://www.smartkarma.com/entities/didi-chuxing-inc" target="_blank" data-smartkarma-citation="entities:27467:1" rel="noopener">DiDi Chuxing (1284375D CH)</a> plans to go public, allowing existing investors want to cash out during a difficult time for the business. DiDi is backed by Softbank and is regarded as the Chinese version of Uber. Even before the pandemic, the company was struggling to generate profits and also had issues regarding the safety of passengers. The pandemic could have only made things worse for the company. At a time where ridesharing is avoided, DiDi wants to go public. If the news is true, the timing of the IPO indicates that DiDi is desperate for money. In this report, we take a look at the company, its background, growth prospects, and an estimated valuation. In our opinion, it is unlikely that the company will have an IPO in the current economic situation.We go through the details below.

It was reported on last week that DiDi Chuxing (1284375D CH) plans to go public, allowing existing investors want to cash out during a difficult time for the business. DiDi is backed by Softbank and is regarded as the Chinese version of Uber. Even before the pandemic, the company was struggling to generate profits and also had issues regarding the safety of passengers. The pandemic could have only made things worse for the company. At a time where ridesharing is avoided, DiDi wants to go public. If the news is true, the timing of the IPO indicates that DiDi is desperate for money. In this report, we take a look at the company, its background, growth prospects, and an estimated valuation. In our opinion, it is unlikely that the company will have an IPO in the current economic situation.We go through the details below.

DiDi Has Merged Its Way Through- Time for an IPO?

United States

GrubHub, Inc. operates an online and mobile platform for restaurant pick-up and delivery orders. The Company's platform assists diners in searching for local restaurant, tracking the order and re-order for convenience. The Company operates within the United States and the United Kingdom.

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Grubhub Inc (GRUB US)

DoorDash IPO – Unprofitable Despite Pandemic Boost

Unlike some "contribution margin" companies DoorDash appears to have a path to profitability. The question is whether valuations will be reasonable...

Mio Kato

DoorDash IPO Context: What It Is & How It Compares to Online Food Delivery Universe

US-based on-demand food delivery company DoorDash plans to list soon. In this note we show investors how DoorDash differs from some of its peers in...

Tracking Traffic

Meituan: Key Drivers of Top-Line Growth & Margin Lift Receding, Obscured By Growth of 'Other' Items

New name Rider costs - $3690 Advertising Summary

Tracking Traffic

DiDi Has Merged Its Way Through- Time for an IPO?

It was reported on last week that DiDi Chuxing (1284375D CH) plans to go public, allowing existing investors want to cash out during a difficult...

Aqila Ali

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52-week Range

Market Cap (USDm)

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DoorDash IPO: First Take on Proposed IPO Price Range of US$75-85 Per Share

On some metrics, US-based online food delivery company looks reasonably priced at the mid-point of its IPO range. We highlight some factors that...

Tracking Traffic

DoorDash IPO – Unprofitable Despite Pandemic Boost

Unlike some "contribution margin" companies DoorDash appears to have a path to profitability. The question is whether valuations will be reasonable...

Mio Kato

DoorDash IPO Context: What It Is & How It Compares to Online Food Delivery Universe

US-based on-demand food delivery company DoorDash plans to list soon. In this note we show investors how DoorDash differs from some of its peers in...

Tracking Traffic

Meituan: Key Drivers of Top-Line Growth & Margin Lift Receding, Obscured By Growth of 'Other' Items

New name Rider costs - $3690 Advertising Summary

Tracking Traffic

DiDi Has Merged Its Way Through- Time for an IPO?

It was reported on last week that DiDi Chuxing (1284375D CH) plans to go public, allowing existing investors want to cash out during a difficult...

Aqila Ali