At the moment it's not certain whether the proposed GBR will go ahead but if it does it could pose a significant risk to Trainline which is why I think the company is trading at this multiple. In terms of impact on market share I think that is hard to quantify at the moment but my personal opinion is at the current valuation the risk might be too overdone by investors. Remember this is a company also buying back shares aggressively.
Thanks for flagging Trainline - never considered it as an investment despite having used it plenty when I lived in the UK. At a forward PE of ~9, strong buyback and genuine brand value it does sound interesting.
A few things I think will act as a permanent cap on valuation:
- The specter of a national ticketing agency replacing them
- The fact that commission rates aren't in their control. A company that doesn't have real pricing power will always be penalized..
That being said, the EU is a huge market. I remember 5-7yrs ago it was still better to go through (incredibly clunky) regional train company websites to get the best ticket prices. If they could chip into that pain point, they could have great runway. I don't know how much brand recognition they have ex-UK, and that could take a significant S&M budget.
Is there any way to track digital ticket adoption in the UK? The tap to pay point is also interesting..do people really just show up to a regional train without pre-buying a ticket these days?!
Thanks for your detailed analysis. 87% of all train journeys in the UK were made using digital rail tickets due to the expansion of Pay As You Go contactless ticketing. This system lets you tap your bank card or mobile wallet at the entry and exit points of a station. The system will then calculate the best fare and apply a daily capping effectively eliminating the need for commuters to pre-purchase tickets.
Not necessarily because Trainline has positioned itself to being a supplier for these new systems(platform One) as well as pivoting into other markets that are behind on the adoption. I think I wrote about this further down in the article
How does the buy price of 3.38 square with the intrinsic value of 1.31?
That bit is not really relevant. Ignore it
How big do you think is the risk of Great British Railways eating into Trainline's market share when their proposed app gets set up?
At the moment it's not certain whether the proposed GBR will go ahead but if it does it could pose a significant risk to Trainline which is why I think the company is trading at this multiple. In terms of impact on market share I think that is hard to quantify at the moment but my personal opinion is at the current valuation the risk might be too overdone by investors. Remember this is a company also buying back shares aggressively.
Thanks for flagging Trainline - never considered it as an investment despite having used it plenty when I lived in the UK. At a forward PE of ~9, strong buyback and genuine brand value it does sound interesting.
A few things I think will act as a permanent cap on valuation:
- The specter of a national ticketing agency replacing them
- The fact that commission rates aren't in their control. A company that doesn't have real pricing power will always be penalized..
That being said, the EU is a huge market. I remember 5-7yrs ago it was still better to go through (incredibly clunky) regional train company websites to get the best ticket prices. If they could chip into that pain point, they could have great runway. I don't know how much brand recognition they have ex-UK, and that could take a significant S&M budget.
Is there any way to track digital ticket adoption in the UK? The tap to pay point is also interesting..do people really just show up to a regional train without pre-buying a ticket these days?!
Thanks for your detailed analysis. 87% of all train journeys in the UK were made using digital rail tickets due to the expansion of Pay As You Go contactless ticketing. This system lets you tap your bank card or mobile wallet at the entry and exit points of a station. The system will then calculate the best fare and apply a daily capping effectively eliminating the need for commuters to pre-purchase tickets.
Is this not terminally problematic for the Co barring a massive, successful pivot to the EU?
Not necessarily because Trainline has positioned itself to being a supplier for these new systems(platform One) as well as pivoting into other markets that are behind on the adoption. I think I wrote about this further down in the article