Trainline IPO: Worth buying a ticket?

There are very few IPOs lined up in London, so when one comes along they attract lots of attention. 

Despite rail booking app Trainline announcing plans to float the business this summer, there's still a "Sunday service" appearance to London's timetable of forthcoming IPOs.

The rail and coach booking app has followed Watches of Switzerland in braving the uncertain market conditions in order to pursue a listing, possibly as soon as June.

But in contrast to the current rush of tech-driven listings on Wall Street, there's not much else in the pipeline to excite investors eager for some new issue action in London.

Travelex owner Finablr is the most recent debutant, but the payments and foreign exchange company had to cut the IPO price in the face of jittery markets. Its shares remain close to their opening price of 175p, compared with the pre-IPO target range of 210p to 260p.

The disappointing initial performances of much-hyped and loss-making Uber (NYSE:UBER) and Lyft (NASDAQ:LYFT) certainly haven't helped. In contrast to the $82.4 billion valuation of Uber on its Wall Street debut earlier this month, Trainline would be valued at around £1 billion should it press the starting button on its IPO. That would still be one of the biggest floats in London this year, alongside Finablr and fellow payments company Network International after its IPO in early April.

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Trainline has been on the IPO platform once before in 2015, but the plan was derailed when private equity firm KKR stepped in to buy the business. It is now planning a free float of at least 25%, although reports have suggested KKR may still also consider an outright sale.

The Trainline business generated revenues of £210 million from ticket sales of £3.2 billion in its 2019 financial year, leading to adjusted earnings of £53 million and a margin of 25.1%. The company gathers millions of routes, fares and journey times from 220 rail and coach carriers across 45 countries, while the website is visited more than 80 million times a month.

With rail and coach markets estimated to be worth more than €225 billion per year, Trainline's owner said growth prospects were boosted by the shift towards more environmentally-friendly forms of travel and focus on online and eTicketing. 

Online penetration in rail in the top five European markets only represented 39% of bookings in 2017, compared to car hire and low-cost air travel estimated to be 50% and 86% respectively. Today's document also points out that only 1 in 7 tickets in UK rail is an e-Ticket.

The plan for a 25% free-float of Trainline is similar to Apollo Global Management's plan to sell part of Watches of Switzerland in a flotation likely to value the jeweller at up to £660 million. The group, which used to be known as Aurum Holdings and accounted for half of all Rolex watches sold in the UK in 2018, is hoping to target the “underdeveloped” US market.

Successful market debuts for Watches of Switzerland and Trainline may help to restore confidence in the London IPO market after last autumn's disappointing performances of Aston Martin (LSE:AML) and Funding Circle (LSE:FCH). Investors will also be hoping that a pick-up in IPO activity could lead to bigger listings from the likes of Asda, M&G Prudential and Smiths Medical.