With Gourmet’s intention to float out earlier this week, the market is moving beyond the announcement itself and into the harder questions that will define this IPO. How should the business be valued? Who is it really comparable to? And what, exactly, are investors being asked to underwrite?

As the book-building process approaches, those questions collapse into one central debate: Should Gourmet be priced like a conventional local grocery chain, or does it deserve the premium multiples of a regional peer such as Spinneys UAE?

Our take

The right valuation benchmark: Spinneys, not LuLu. For investors searching for a regional comparable, the template is already trading in Dubai. While Gourmet has little in common with LuLu’s volume-led, mass-market model, it aligns closely with the Spinneys Dubai thesis — a business built around affluent immunity, where a higher-income customer base is structurally better able to absorb inflation.

This positioning is not accidental. Gourmet Chairman Michael Wright spent over a decade as Group CEO of Spinneys, transplanting the same quality-first, high-margin operating DNA into the domestic grocer.

Where the valuation debate really sits: Margins. Spinneys is currently trading a 17x P/E on the Dubai Financial Market, and it had a sector-leading 19.6% EBITDA margin at listing. Gourmet, by contrast, comes to market with a 13.8% EBITDA margin, up sharply from 6.3% in 2022.

The bull case is not that Gourmet already matches Spinneys’ profitability. Rather, investors are being asked to underwrite the 600 bp efficiency gap that management is expected to convince investors it can close over the next few years. The valuation, in that sense, is less about current earnings and more about operational convergence.

Institutional appetite: Who buys without an export hedge? For foreign and regional investors, Gourmet lacks a feature that has supported recent industrial IPOs: export revenue as a natural FX hedge.

Management’s counter-argument is that vertical integration is the hedge. Through Gourmet Food Solutions, the group manufactures its own meat, poultry, and bakery products, insulating margins from volatility in imported finished goods and reframing the story around import substitution rather than FX exposure.

One of the strongest upside signals is what isn’t happening. B Investments is not exiting, retaining a 40% stake post-IPO (down from 53% stake). That functions as a de facto long-term lock-up and suggests the private equity sponsor sees further value creation that a full exit would fail to capture. With the offering (of up to 47.6% of the grocer) structured as 80% institutional and 20% retail, it’s likely the bookrunner — EFG Hermes — has been courting a cornerstone investor to anchor the book and encourage engagement — as they did with National Printing.

The cashout concern: A common one with secondary-heavy IPOs is that the company emerges capital-constrained, with proceeds flowing to selling shareholders rather than the business. Gourmet’s balance sheet mitigates that risk. The company enters the listing process with EGP 274 mn in cash and minimal debt of EGP 29 mn, giving it sufficient liquidity to fund new store openings and expand its “Produced by Gourmet” range without relying on IPO proceeds. This financial flexibility also allows Gourmet to pursue growth while still supporting a dividend policy, aligning it with the yield expectations investors now associate with Spinneys UAE.

When can we expect Gourmet to start trading? While the Intention to Float provides no information about when we can expect the grocer to start trading on the EGX, we think it will happen sometime over the coming few weeks before we welcome Ramadan. Trading volumes dry up during the month, and trading days get shorter.

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