Australian (ASX) Stock Market Forum

IPP - iProperty Group

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piggybank said:
Hi robusta,

Since your last post the stock has only continued to power on up with todays close being $3.93 (compared to $2.94 - 23/02/14). Was that prognosis based on T/A or Fundamental analysis? I see the latest P/E for it is around the 420 mark:eek: they must be expecting a massive amount of growth in the the near term!!

Cheers PB

Click to expand...

Hi Piggybank

Guess that just proves I'm no good at predicting short term share movements. Not sure how to classify my analysis my main thoughts are nothing can go up in price like IPP has forever. Sooner or later there will be some sort of correction. You know the sort of thing, revenue grows at only 30% when the market is expecting 40%, heaps of stop losses are hit...

On a personal note IPP has grown to a touch north of 26% of my portfolio. Options being considered are taking some profits (probably somewhere around my initial investment) either through a normal sell order or maybe a trailing stop.
 
Ahhh I feel better now, down over 8% today on top of yesterday's fall. It's sort of like you know you are going to get the cane but don't know when....
 
robusta said:
Ahhh I feel better now, down over 8% today on top of yesterday's fall. It's sort of like you know you are going to get the cane but don't know when....
Click to expand...

IPP has come back a fair bit this week... from an all time high of $4 down to now ~$3. To put it in perspective though, that's only the price it traded back on 17 March. So it's moving very much at a speed that it usually does.

There's a little bit of mini tech bust going around the work at the moment. King Digital (With their one-hit wonder Candy Crush) absolutely sucked on debut while Facebook has came off a fair bit. Closer to home you will find darlings like XRO coming off recent high as well.
 
Nothing unusual with the half year results out today, revenue up 44%, growth in margin from Malaysia, Hong Kong growth 47% and finally reaching profit. Share price down 2.79%

Not sure how to read this in the media release.


Subsequent to 30 June 2014, REA Group Limited (ASX: REA) announced the purchase of a 17.22%
interest in the Group for total cash consideration of $106.3m. iProperty Group looks forward to the
value that REA will be able to provide to the Company as the business work to find ways to come
closer together.
Click to expand...

REA have a website in Hong Kong, I wonder if they are going to work together in that market or just take over IPP.
 
It wasn't a particularly strong quarter from the operating cash flow perspective. Receipts of $5.104m was 15% lower than the Jun 14 quarter, while also -13% lower than the PcP.

I spent a bit of time looking at the historical growth of REA compared to IPP. These two charts are pretty illustrative.

First chart is pretty self explanatory. Starting off the same point @ ~$1.5m cash receipts per quarter, REA's growth was relentless, while IPP's qtrly receipts have lagged in terms of growth, and actually showing some stagnation in the last 4-5 periods.
IPPvsREA.JPG

Second chart is a quick valuation metric... a simple market cap (at the end of the quarter concerned) divided by quarterly receipts. So a value of 20 means the company is worth 20x quarterly cash receipt (NOT net cash flow, just the top line receipt). REA's history showed that, even with very substantial and sustained growth, it's valuation never reached the height of IPP, which currently trades at ~100x.
IPPvsREA 2.JPG

So the problems with IPP is that... growth hasn't been as good, but it's valuation is sky high.

I am not saying that IPP won't be a long term success story, but it may be worth digging a bit deeper on whether there are something fundamentally different in terms of IPP's market or operations such that it hasn't enjoy the success of REA over the same timeframe.

It's reassuring that REA sees something in it... but REA also acquired a whole heap of other realestate sites along the way that never amounted to much.

Anyhow, I guess IPP could easily trade anywhere between 20-100 qtrly cash receipts... which means plenty of large swings.
 
Looks like REA thought IPP has something in it after all. Takeover offer at $4.
I suppose IPP represents potential growth areas that REA may feel it doesn't have in Australia any longer.
But the Asian markets are very different real estate markets to OZ. For example in Hong Kong, all the information is with the agents - when you want to buy a property in Hong Kong (like in the USA) you go to an agent first rather than doing all the research yourself online etc. So less capacity for network effects to build as has happened in Australia (REA/Domain) and UK (Rightmove/Zoopla).
This also a reason Trulia/Zillow struggles in the US - agents act for the buyer and for the seller which demands quite different business propositions for online real estate portals.
 
On February 17th, 2015, iProperty Group Limited (IPP) was removed from the ASX's official list in accordance with Listing Rule 17.11, following implementation of the scheme of arrangement by which Austin Bidco Pty Ltd, a wholly-owned subsidiary of REA Group Limited, acquired all of the Company's issued capital.
 
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