Archived article
Please note that tax, investment, pension and ISA rules can change and the information and any views contained in this article may now be inaccurate.
magazineOcado’s late delivery
Online supermarket Ocado (OCDO) has finally rewarded patient investors with a long-promised deal with an overseas retailer to use its technology platform. However the excitement is tempered by news the new tie-up will be earnings and cash neutral in the current and 2018 financial years, albeit ‘increasingly accretive thereafter’.
Rather than a global grocer, the £1.97bn cap’s new partner is a mystery regional European retailer that ‘wishes to remain anonymous until it launches its online business in order to retain competitive advantage’. The absence of firm financial details surrounding the tie-up also disappointed some.
This unnamed retailer will pay an up-front fee to Ocado for access to its Ocado Smart Platform (OSP), which gives access to Ocado’s software required to run an online grocery business. Ocado’s partner will also pay ongoing fees based on the volume of products sold online, but won’t be using Ocado’s automated warehouse technology.
With a 400p price target, Numis Securities remains confident that ‘this will be the first of multiple deals, and continue to believe that Ocado can provide a best-in-class end-to-end solution for global online grocery retailers.’ Given Ocado trades on more than 217 times Numis’ 1.4p earnings per share forecast for the year to November, further deals will need to be signed to keep the market satisfied.
Ocado promises further international deals, although at 304.67p, the shares are priced for perfection. (JC)
Important information:
These articles are provided by Shares magazine which is published by AJ Bell Media, a part of AJ Bell. Shares is not written by AJ Bell.
Shares is provided for your general information and use and is not a personal recommendation to invest. It is not intended to be relied upon by you in making or not making any investment decisions. The investments referred to in these articles will not be suitable for all investors. If in doubt please seek appropriate independent financial advice.
Investors acting on the information in these articles do so at their own risk and AJ Bell Media and its staff do not accept liability for losses suffered by investors as a result of their investment decisions.
