1、 Disclosures&Disclaimer This report must be read with the disclosures and the analyst certifications in the Disclosure appendix,and with the Disclaimer,which forms part of it.Issuer of report:HSBC Securities(USA)Inc View HSBC Global Research at:https:/ News headlines suggest more M&A in food deliver
2、y sector Uber Eats is a new challenger,taking share globally,especially in Europe in Latin America.Will Naspers respond?Uber Eats has poor economics in India;a sale would be positive for ANR(take rates)and contribution margins More M&A in online food delivery sector,a long road towards rationalizati
3、on According to Bloomberg(28 July 2019),Uber Eats is looking to sell its food delivery business to Amazon in India,and European food delivery platformsT and Just Eat are in merger talks.We think these headlines support our view that there is room for only two or three big players in the food deliver
4、y sector in each market.With Uber Eats powering ahead and taking sharing in Europe,the US and Latin America,we think consolidation between competitors is necessary.We also think Naspers,with USD6bn of cash on the balance sheet,could get more aggressive funding food delivery investments(has stakes in
5、 iFood and Delivery Hero).Positive for Uber if loss-making India Eats business could be sold to Amazon.We point out that expansion in India was highlighted by Uber management as the main reason for Eats ANR pressure in 1Q19.India is a highly competitive market for online food delivery platforms,with
6、 many well-funded competitors.If Amazon acquires Uber Eats India,it would probably integrate food delivery into its Prime offering.If confirmed,the news is positive from Ubers perspective but does not alleviate concerns of competitive pressures for Naspers-investee Swiggy.Consolidation in Europe,we
7、think more M&A to come in the sector.In our report Uber and Global Ride-Hailing,published on 22 July 2019,we argued for more consolidation among pure play food delivery players that face higher sales&marketing costs vs Uber and a lower share of 1P delivery.Own delivery(1P)remains a drag on profitabi
8、lity in most cases but can significantly increase supply of restaurants and improve the customer experience.From Naspers perspective,we expect the company to step up its investments in food delivery and deploy more of its USD6bn cash on the balance sheet to grow the market and fight off competition.
9、In this note we also change our estimates and target price for Naspers.30 July 2019 Masha Kahn,CFA Senior Analyst,TMT HSBC Securities(USA)I+1 212 525 7317 Ziyad Joosub*Analyst HSBC Securities(South Africa)(Pty)Ltd +27 11 676 4223 Henning Cosman*Analyst HSBC Bank plc +44 20 7991 0369 Herve Drouet*Hea
10、d of EEMEA TMT Equity Research HSBC Bank plc +44 20 7991 6827 *Employed by a non-US affiliate of HSBC Securities(USA)Inc,and is not registered/qualified pursuant to FINRA regulations Food Delivery M&A Equities Internet Software&Services Global Key changes to ratings and estimates Current _ TP_ _ Rat
11、ing _ Upside/Company Ticker Currency price Old New Old New downside Uber UBER US USD 44.52 49.00 49.00 Hold Hold 10.1%Yandex YNDX US USD 37.04 48.00 48.00 Buy Buy 29.6%Naspers NPN SJ ZAR 3,574.53 3,886.00 4,035.00 Buy Buy 12.9%Source:Bloomberg,HSBC estimates.Priced as of close at 26 July 2019 More c
12、onsolidation and rationalization ahead in online food delivery sector 2 Equities Internet Software&Services 30 July 2019 Global online food delivery map Source:HSBC Uber dominates global food deliverySource:HSBCUber Eats in top two positionsUber challengingUber Eats not present but Uber isUber Eats
13、or Uber not presentUSDominant:DoorDashChallenger:GrubHub,Uber Eats,Postmates,OtherUKDominant:Just EatChallenger:Deliveroo,Uber EatsIrelandDominant:DeliverooChallenger:Just Eat,Uber EatsPortugalDominant:Uber EatsChallenger:Glovo,noMenu,?Comer em Casa,Comidas.ptGermanyDominant:TakeawayChallenger:Deliv
14、erooRussiaDominant:Delivery ClubChallenger:Yandex.FoodChinaDominant:Meituan DinapingChallenger:Ele.meAustraliaDominant:Uber EatsChallenger:Just Eat,DeliverooSouth KoreaDominant:Baedal MinjokChallenger:Delivery Hero,Shuttle,Pick Your DishUAEDominant:DeliverooChallenger:Uber Eats,MathaqiSaudi ArabiaDo
15、minant:Delivery HeroChallenger:Uber Eats,MathaqiJapanDominant:MaishokuChallenger:Uber Eats,Fine Dine,?Demae-Can,Bento.jp,Rakuten DeliveryHong KongDominant:Deliveroo,Just Eat,Uber EatsChallenger:Delivery Hero,Uber EatsTaiwanDominant:Delivery HeroChallenger:Uber Eats,?Honestbee,Yowoo,DeliverooIndiaDom
16、inant:SwiggyChallenger:Zomato,Uber EatsEgyptDominant:DeliverooChallenger:Delivery Hero,?Just Eat,Uber EatsUkraineDominant:Uber EatsChallenger:Delivery Hero,UfoodRomaniaDominant:TakeawayChallenger:Delivery Hero,?Glovo,Uber EatsSwitzerlandDominant:TakeawayChallenger:SkipTheDishes,?Uber Eats,EAT.CHFran
17、ceDominant:Uber EatsChallenger:DeliverooSpainDominant:Just EatChallenger:Glovo,DeliverooBelgiumDominant:TakeawayChallenger:Deliveroo,Just Eat,Uber EatsItalyDominant:Just EatChallenger:Deliveroo,?Uber Eats,Delivery HeroNetherlandsDominant:TakeawayChallenger:Uber EatsDeliveroo,Hungry.nlMexicoDominant:
18、Uber EatsChallenger:Just Eat,Didi Food,Rappi,PostmatesArgentinaDominant:Delivery HeroChallenger:Rappi,Glovo,iFood,?Buenos Aires Delivery,Uber EatsChileDominant:Delivery HeroChallenger:Uber Eats,Zomato,RappiBrazilDominant:iFoodChallenger:Uber Eats,LoggiOthersColombiaDominant:RappiChallenger:Delivery
19、Hero,Uber Eats,iFood,OthersSouth AfricaDominant:Mr D FoodChallenger:Uber Eats,OrderIn,BoltNew ZealandDominant:Just EatChallenger:Uber Eats,?Food NinjaKenyaDominant:Jumia FoodChallenger:Yum Deliveries,?The Good Food Company,Uber EatsPeruDominant:Delivery HeroChallenger:Uber Eats,Zomato,?Grubhub,Glovo
20、CanadaDominant:Delivery HeroChallenger:DoorDash,Just Eat,?Skip The Dishes,Uber EatsMalaysiaDominant:Delivery HeroChallenger:GrabFood,DeliverEat,?Honestbee,Dahmakan,?Running Man Delivery,FoodTimeIndonesiaDominant:Go-Food(Go-Jek)Challenger:GrabFood,ZomatoDenmarkDominant:Just EatChallenger:Hungry.dk,Wo
21、ltPolandDominant:TakeawayChallenger:Uber Eats,lunching.plSwedenDominant:Delivery HeroChallenger:Wolt,Uber Eats 3 Equities Internet Software&Services 30 July 2019 Uber Eats looking to sell India business that was a drag on ANR Amazon is reportedly eyeing the acquisition of Uber Eats India business(Bu
22、siness Today,29 July 2019),at an estimated valuation of c.USD300m(we calculate a 1.5x EV/GMV considering a GMV run rate of USD200m(Entrackr,29 July 2019).Amazon is looking to add food delivery to its Prime app in Indiawhich has c.10m usersfor which this transaction could add more daily users and res
23、ult in incremental revenue through cross-selling.According to Inc42(29 July 2019),both Swiggy and Zomato were also in merger talks with Uber Eats in 1Q19 but the deals fell through due to price and tax considerations.Indian online food delivery market(Dec 2018):Swiggy leads,Zomato is a strong compet
24、itor and Uber Eats is a newcomer Source:Times of India(22 Feb 2019),HSBC Amazon closed its Amazon Restaurant delivery service in the US in June 2019 after four years of operations,and exited the UK in Dec 2018,after two years of operations.However,in May 2019,it invested USD575m in European online f
25、ood delivery aggregator Deliveroo,valuing it at over USD2bnpending approval(Techcrunch,17 May 2019).24.820.24.74.08006501501300.05.010.015.020.025.030.002004006008001000SwiggyZomatoUber EatsFoodPandaMonthly Orders(m)Daily Orders(000)No room for sub-scale player Amazon is reportedly eyeing Uber Eats
26、India business,while Just Eat and Takeaway are also apparently in the middle of takeover talks Big TAM for both restaurant and grocery delivery,but also large capital investments required M&A synergies significant for both food delivery and ride-hailing:we highlight Yandex/Uber and Takeaway/DH deal
27、in Germany Equities Internet Software&Services 30 July 2019 4 Key things to note Amazon can leverage its“Amazon Pay”wallet.It has more than 10 million Prime subscribers Strong technical know-how and delivery fleet.Amazons commitment to Invest USD5bn in India.Strategic partnership with Uber Eats coul
28、d be beneficial for geographical expansion and consumer insights.In our Uber initiation of coverage report(Uber and Global Ride-Hailing,22 July 2019)we highlighted that Uber Eats India is a smaller player in a highly competitive market facing several well-funded competitors.Uber management mentioned
29、 that subsidies in India weighed heavily on its Eats ANR in 1Q19.The news of the potential sale of its India Eats business could help Eats segment ANR going forward.In particular,in India,we increased incentives to consumers,drivers and restaurants,which drove nearly half of the year-over-year decli
30、ne in Uber Eats take rate to 8%from 12%a year ago.Nelson Chai,CFO,Uber(1Q19 earnings call)Consolidation in European food delivery Other recent breaking news was in regards to the Netherlands-based T in merger talks with the UKs Just Eat.T made a GBP5bn(USD6.2bn)bid for rival Just Eat Plc(Bloomberg).
31、At current valuations,the merged entity is estimated to have a combined valuation of c.USD13bn,with 360m annual orders worth c.USD8bn(GFS/GB).A press release states that the combination of both companies would mean Just Eat shareholders would own approximately 52.2%and T shareholders own approximate
32、ly 47.8%of the share capital.Jitse Groen,currently CEO of T,will assume the role of CEO of the Combined Group,and Paul Harrison,currently CFO of Just Eat will assume the role of CFO of the Combined Group.The Board of Just Eat and the Management Board of T believe that the possible combination is a h
33、ighly compelling opportunity to create a combined business that will benefit from:creating one of the worlds largest online food delivery platforms with 360m orders worth EUR7.3bn in 2018 a strong founder-led management team with 40 years of combined experience in the sector strong leadership positi
34、ons in many of the worlds largest food delivery markets,including the United Kingdom,Germany,the Netherlands and Canada an ability to deploy capital and resources to strengthen its competitive positions as the company determines appropriate and operating leverage potential:greater ability to leverag
35、e investments,in particular in technology,marketing and restaurant delivery services across the combined business.5 Equities Internet Software&Services 30 July 2019 Could Naspers be part of a rival bid?We believe Delivery Hero in combination with Naspers could potentially mount a rival bid for Just
36、Eat.Delivery Hero could fund the deal through equity whilst Naspers as a 22%shareholder of Delivery Hero(DH)could utilize cash as well(net cash position of USD6bn).In addition to the above points,we think Naspers would be attracted to a merger of DH and Just Eat as it would allow the company to furt
37、her expand its online food footprint in addition to gaining even higher economic exposure to iFood in Brazil(33%owned by Just Eat).The still high FCF/EBITDA margin UK business would also be a key attraction to both DH and Naspers as their online food business currently both run at meaningful EBITDA
38、losses.Due to their superior funding headroom,we believe Naspers and DH in combination could provide Just Eat with a premium offer in excess of that tabled by T.However we are also cognizant of the fact that DH recently sold off its German operation to T and thus the company and Naspers do not wish
39、to enter into a European online food battle with Deliveroo(Amazon backed)and Uber Eats,preferring rather to focus on their existing high-EM-exposed footprint.(Please refer to our latest report on Naspers:“NewCo”evolutionary first step that could support greater externalisation in the future,28 March
40、 2019.)Uber to enter grocery delivery segment According to GroceryDive(23 May 2019),Uber is developing its grocery delivery business and the Uber CEO views the new segment as complementary to the core Uber Eats offering.We will move into grocery A lot more people will be eating at home.Right now we
41、are busy with Eats,but you can see grocery as an adjacent business.Were thinking about Uber much more as a platform.Uber CEO Dara Khosrowshahi,(GroceryDive,9 October 2018)According to Bloomberg(26 July 2019),Uber is in talks with European supermarkets in regards to a potential grocery delivery partn
42、ership.Sainsburys is mentioned as one of the parties involved in the talks with Uber,according to the same article.In January,Uber Eats struck a similar deal with Australian supermarket Coles to deliver its ready-to-eat and ready-to-heat meals,as well as dairy,bakery,fruit,and breakfast cereals to s
43、hoppers.A dedicated team in Coles picks the orders from supermarket shelves and hands them to Uber Eats drivers,who will deliver the orders to homes or workplaces in less than 30 minutes for a small charge.Earlier this month,Sainsburys announced it was teaming up with Deliveroo to bring freshly bake
44、d pizzas straight from its in-store food counters to customers homes.Meanwhile,Asda began working with Just Eat last year to trial a similar pizza delivery service.The chain recently stated that this had proved a“huge success”and would be rolled out to up to 50 stores by the end of the year.Grocery
45、delivery represents a large TAM and an attractive growth opportunity.According to eMarketer,US food and beverage ecommerce sales are approaching USD20bn in 2019e and could double by 2023e.Equities Internet Software&Services 30 July 2019 6 Uber clearly sees its future as a broader platform of deliver
46、y services.According to Techspot(23 July 2019),Uber is following Amazon Prime playbook and testing subscription services around Eats,rides and new mobility services(NEMO).Uber is offering a fixed discount on every ride,free Uber Eats delivery and free JUMP bike and scooter rides for USD24.99 per mon
47、th.We would not be surprised if a grocery delivery service could be part of Ubers platform subscription service in the future.Yandex Taxi turns profitable,Takeaway/Delivery Hero merger in Germany shows big marketing synergies We see significant merger synergies in both the food delivery and ride-hai
48、ling sectors thanks to elimination of aggressive subsidies,optimisation of sales&marketing spend and scale/efficiency benefits.From Ubers perspective,we see the turnaround in Yandex Taxis profitability as an indicator of how quickly subsidies can normalize following in-market consolidation(Uber and
49、Yandex merged in 1Q18).The Yandex Taxi business turned profitable in 2Q19(EBITDA was RUB423m in 2Q19)despite continuing investment in autonomous vehicles and food delivery.Excluding our estimates for losses in autonomous and food,we think the Rides business is already at 21%EBITDA margin(as a%of rev
50、enues).(Please refer to our Yandex 2Q19 earnings note:Taxi turns profit;foreign ownership limit unlikely to become law,published on 26 July 2019.)Yandex Taxi became EBITDA-positive in 2Q19(as%of GB)Source:HSBC estimates,Company data In the food delivery sector,we point to the announced merger betwee
