Jumia is an African e-commerce, travel booking, payment, and food delivery company with operations across Africa, namely the likes of Nigeria, Kenya, South Africa, and Egypt. The company has filed for an IPO on the NYSE at a date yet to be determined, and we believe this could be the most prominent IPO even with the likes of Uber and Slack in the IPO process.
Long Term Secular Tailwinds
The market in which the company operates is an area that is at the route of EM, with markets who are experiencing not only large amounts of economic growth as a result of industrialization and education, but also an area of large population growth. These mixed with the fact that Jumia is the largest E-Commerce player in large markets, such as Nigeria, means that it could have serious long term potential as a play on these markets.
Jumia’s main market, Nigeria, is a region we believe, longer term, has the potential to be the next china. The country is expecting 6% growth in 2019, and longer term over 40% of Nigerians are expected to join the middle class by 2050. This naturally gives Jumia a huge runway for growth, as more people can afford to buy on the site. Even better, the company isn’t just in e-commerce, it’s also got the potential to be the internet company for all main aspects of life in the country. Food delivery, travel bookings, payments will all thrive as the economy in Nigeria
IPO Potential runner
The bull case for the short term for this IPO is the ETF adoption and adding of the company. All the african ETFs will be looking at adding this, as it will be the largest African Tech company, especially with African ETFs so exposed to natural resources and industrial stocks(other than naspers). This should provide stable ownership as well as money flowing to buy the company. Especially after ipo with a smaller float outstanding, the money flow from ETFs has the potential to make Jumia a runner.
We think it will be much more than just African ETFs adopting this, but also global ETF and tech-centric ETFs as well. This will add even more buying potential with many ETFs being underweight Africa with the scarcity of NYSE listed and tech companies.
Next leads into this under-allocation to Africa, which will see many investors jump on the bandwagon of the first prominent African tech IPO. We think the search for balance among investors looking for allocation to Africa will look at Jumia first, leading to more money flow over time.