JustKitchen Expands To Hong Kong, Gets BUY Rating from Beacon Research with a Price Target Of $3
The ghost-kitchen player takes on a multi-national expansion plan and delivers on the promise
Toronto Stock Exchange traded JustKitchen (TSXV:JK.V) got a BUY trading recommendation from the Canadian research team of Beacon Securities coupled with a $3 price target bump (currently trading at $1.37).
What in the current capital markets climate deserves an over 100 per cent price target prediction?
It all comes down to our post-pandemic change of human habits. The research states what we already know: consumer behavior, in terms of eating habits, has changed dramatically over the past two years. Today, approximately 50 per cent of a family’s food budget is spent on food prepared outside their home versus 25 per cent registered in the decades before the pandemic struck.
Of that budget, a greater and greater percentage is being allocated to take-out/delivery versus dining-out/eat-in restaurants. In fact, since 2014, online ordering and delivery has grown 300 per cent faster than dine-in traffic (perhaps not a coincidence that 2014 was the year UberEATS was created) with 60 per cent of US consumers ordering food delivery at least twice per week.
While restaurants have pivoted toward take-out/delivery during the pandemic, they are not operationally structured for such a business with too many overhead cost items (i.e. dining rooms, staff, high rent, etc.). This has given rise to the ghost kitchens phenomena, kitchen hubs that are specifically designed for the delivery market.
JustKitchen is a newly listed public company, which is, as its name implies, just a kitchen that caters solely to the delivery market but the key factor for interested investors is that while many of the Ghost Kitchens are local initiatives, JustKitchen has chosen the exclusive path of an international expansion taken by elitist few such as UberEats, Deliveroo and Cloud Kitechen.
JK’s peer group, which consists of delivery apps as well as online meal kit delivery companies, have grown their revenues by an average of 120 per cent year-on-year based on their recent reported results. While the peer group trades at an average of 5.5x FY22 (Dec) consensus sales forecast, JustKitchen presents the highest investment returns potential as it trades at only 1.9x its already-conservative FY23 revenue forecast that has but one country hub with 35 spokes serving the last mile.
The combination of anticipated strong revenue growth from a conducive macro environment and a significant valuation discount to its peer group led the research team to believe the shares of the company represent one of the most interesting risk-return trade-offs.
The newly announced expansion of the JustKitchen business to Hong Kong ad their upcoming plans for US entry only increases upon this estimate and makes this company potentially one of the most aggressive global players and a potential contender for Ghost Kitchen Delivery sector domination among giants.