VALUING EUROPE'S FASTEST

GROWING COMPANY:
HELLOFRESH IN 2017

Equity security analysis

Group:
TAN M0745035
SIDNEY M0845008
SHOGO M0845XXX
GILL M0845027
MINDY M0845010
RUBY M0845009
 Background

NEED TO KNOW IPO price valuation

Assumtions
 C O M PA N Y ' S B A C K G R O U N D

• Meal-box delivery company 

• Founded in 2011 by Dominik Richter, Thomas Griesel, and Jessica Nilsson is Berlin, Germany.

• Growth revenue: €2.3m in 2012 to €305m in 2015 (400%/year)

• Start-up incubator Rocket Internet: €2.5 million. (obtained a 60 percent stake )

• Investment manager Baillie Gifford: €75 million in 2015, (an equity of 3 %). This valued the company at €2.6 billion

• After Baillie Gifford made its investment, Rocket Internet called off the IPO.

• Other investors was unwilling to buy into the €2.6 billion valuation of Hello Fresh. 

• Rocket Internet made a second attempt at bringing HelloFresh to the Frankfurt Stock after one and a half years. 

• This time (October 2017) at more than half of its 2015 valuation.
 C O M PA N Y ' S B A C K G R O U N D

• Business model: sell & deliver to customers' door meal boxes

• Build on increasing for online shopping
• Expanded into 9 countries (US,…)
• Critical success factor
• 2017: online food market was in rapid development
• Competition: Amazon, Whole Food, Unilever&partnership, Albertson&Lidl, Plated&Kochzauber,….
 IPO EVALUATION

• Combined method for analysis

 Discounted Cash Flow (DCF)
 Valuation with comparable
• The fundamental principles of such method are:
 Growth rate
 Cost of sales and SG&A expenses 
 Customer acquisition costs – CAC 
 Revenue with contribution margin (long-term profit potential)
• HelloFresh's IPO prices: €10.25 with assumptions 
• Simulation method with sensitivity and scenario analysis (WACC, Sale growth, CAC etc)
 CUSTOMER ACQUISITION COSTS (CAC)

• Exhibit 1: the net present value of the investment of 82,000 euros is used to obtain 1,000
customers with different attrition rates. The article mentions that if the monthly customer
attrition rate is equal to 20%, then the investment to acquire a customer for 82 euros proves to
be a negative NPV. But between 10-15% is positive NPV. 

• Customer attrition rate in the United States in 2018, by industry

 C U S TO M E R A C Q U I S I T I O N C O S T S ( C A C ) W I T H
CONTRIBUTION MARGIN

• Exhibit 3: Through simplified calculation of customer acquisition, it’s notice the customer
attrition rate could be much larger than 20%.
 C O M PA R A B L E

• While PB ratio of Blue Apron is 6.5, PB ratio of Hello Fresh is 3.7. Because, market capitalization
of HF is smaller than BA. Whereas, book value to equity is bigger than BA. However, PB ratio is
basically 1.0. so, these number is very high ratio even profit or loss to ordinary shareholder. In a
different point of view, the reason why PB ratio is too high means ordinary shareholder’s equity is
low. My assumption is the weight of debt and liability is very heaby.
Hello Fresh(in $, exchange
Blue Apron  Hello Fresh(in €) 
rate 1.13) 
Revenue (2016)  $795.4 million  $674.61  €597.0 million 
Revenue growth (2014-2016)  220% /year  195% /year  195% 
Customer acquisitions cost CAC $94  $93  $82 
Net proceeds  $278 million  $347 million  €307.3 million 
IPO price  $10  $11.58  €10.25 
Equity value (Market capitalization) $1.87 billion  $1.534 billion  €1.3575 billion 
Book value of equity  $0.289 billion  $0.4121 billion  €0.3647 billion 
PB ratio  6.5  3.7  3.7 
 G R O W T H R AT E

• Exhibit 2: 
• Even HE’s net profit is negative, PB is too high. 
• So, my assumption is sales growth rate is very high. According to Exbit2, sales is increasing
rapidly.  Moreover, 1357.5/435.4=3.117 it is basically high. 
• So, there are many investors who expect HF to grow up.
 THANK YOU

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