Talabat Holding Plc shares saw a bumpy start on the Dubai Financial Market (DFM) during their debut on Tuesday. Opening at AED1.70, a 6.25% jump from the offer price, the stock briefly touched a high of AED1.72 before plummeting to AED1.43. By the close, shares settled at AED1.49, marking a 13% decline from the opening price.
MENA IPO Trends Reflect Volatility
The weak aftermarket performance echoes recent IPO trends in the Middle East, where blockbuster listings have struggled post-debut. For example:
- Lulu Retail Holdings Plc shares closed flat after a $1.72 billion IPO on Abu Dhabi Securities Exchange, trading at AED1.89 on Tuesday.
- Oman’s OQ Exploration & Production saw an 8.2% drop from its IPO price on its first trading day in October, closing Tuesday at OMR 0.34.
Vijay Valecha, Chief Investment Officer at Century Financial, remarked:
“Historically, UAE IPOs of state-backed utility companies perform strongly on their first day, often attracting speculative bets for quick profits. In contrast, private players like Lulu, Al Ansari, and now Talabat have shown muted first-day movements, reflecting shifting investor sentiment.”
Valecha added that after Talabat’s share price dipped below its AED1.60 offer price, retail investors likely sold off to avoid further losses, contributing to the day’s low of AED1.43.
Talabat IPO: A Landmark Event
Despite the debut setback, Talabat’s IPO was a major milestone for the GCC region. The MENA unit of Delivery Hero, its German parent, raised AED7.5 billion by floating 20% of its share capital, making it the largest IPO in the region this year. Investor demand was robust, with the book fully covered at the top of the range within just 30 minutes of opening. The strong interest even prompted Delivery Hero to upsize the offering by 5%.
Strong Fundamentals Offer Long-Term Potential
While the first-day performance was disappointing, analysts are optimistic about Talabat’s fundamentals. Valecha pointed to the company’s strong revenue and profit growth in 2023:
- Revenue: AED6.16 billion (up 21% year-on-year).
- Net profit: AED1.08 billion (up 40%).
- Net profit margin: 17.53%, significantly higher than peers in other regions.
With a price-to-sales multiple of 6.04 and a P/E ratio of 34.5, Talabat’s valuation is considered reasonable given its leadership position in online food delivery across key MENA markets, including the UAE, Kuwait, Qatar, and Egypt. The company’s Gross Merchandise Value (GMV) for 2023 reached $6.1 billion, with the total market size for its category estimated at $274 billion in its operating geographies.
“Given Talabat’s market dominance and high growth trajectory, its valuations are not expensive. The company has significant potential to sustain growth in the long term,” Valecha said.
Delivery Hero Faces Cost Pressures
Talabat’s debut woes also weighed on parent company Delivery Hero, whose shares fell 11% on the Frankfurt Stock Exchange. Analysts attributed this decline to rising cost pressures at the parent company, compounded by Talabat’s underperformance on its debut.
