Ocado is set to become the UK’s most valuable listed tech firm after it is de-designated as a retailer in August.
Back in November the Competition and Markets Authority decided to de-designate Ocado as a retailer, after its corporate restructuring following its joint venture with Marks & Spencer.
M&S purchased 50 per cent of Ocado’s UK retail arm for £750 million earlier this year creating the new joint entity Ocado Retail, which is now fulfilling online M&S grocery orders for the first time in its history in September 2020.
Due to its focus on tech provisions, Ocado no longer meets the threshold of £1 billion in retail supply of groceries as it no longer sells groceries in the UK.
However, a note this week from Peel Hunt analysts said they saw value in Ocado’s Solution business, which licences its core intellectual property to clients.
If Ocado wins more market share, Peel Hunt predicted it could generate net revenue of £3.5 billion per annum, making it the largest listed tech company in the UK by valuation.
That valuation is based on Ocado’s ability to execute deals with the potential for a minimum of a £1.1 billion recurring revenue per annum.
Peel Hunt’s note highlighted Ocado’s warehouse deals over the past two years, including US supermarket giant Kroger.
The group’s recently announced deal with Aeon could also see around 26 per cent of the Japanese supermarket firm’s revenue move online by 2035.
Peel Hunt said that reclassifying Ocado on the London Stock Exchange will help solidify Ocado’s perception in the global investment community.
It reiterated its Buy rating based on “huge future potential”.