REA buys stake in iProperty Group
Recommendation
REA Group has announced the purchase of a 17.22% stake in iProperty Group from SeLoger.com, France’s largest property portal and a subsidiary of the German media company Axel Springer. The total consideration was $106.3m, which amounts to $3.40 per iProperty Group share, a 9% premium to their close before the deal of $3.12. iProperty's stock has risen 21% to $3.76 following the news.
iProperty Group operates property classifieds portals in Malaysia, Indonesia, Hong Kong, Macau and Singapore. The company is 23% owned by the Catcha Group, which is chaired by the Singapore-based Australian businessman Patrick Grove. Catcha also owns, amongst other things, 36% of iCar Asia, in which Carsales.com has taken a 23% stake (see our update on 17 Apr 13 (Buy – $9.11)).
Like iCar Asia, iProperty Group is still making losses (of about $3m in the year to 30 Dec 2013, on an operating basis), but it’s further down the track of making money from its various websites, with $19m of revenue in 2013 compared to $2m for iCar Asia. No wonder, then, that the company is valued at three times as much, with a market cap – at the deal price – of $618m.
That amounts to about 30 times 2013 revenue, which factors in a lot of optimism, even with REA Group helping out. We’ll be looking at the half-year results closely when they appear, but we don’t expect to start covering the stock officially for the time being. NO VIEW.
As for REA Group, we dispensed with our price guide due to the difficulties in pinning down a price for the stock, and this transaction doesn’t make things any easier. We’d need a much cheaper price to be interested in buying but, if you already own it, then there’s plenty of reason to HOLD.
As an alternative to buying REA Group directly, bear in mind that you can gain limited exposure – along with a bunch of other stuff of varying attraction – by buying News Corp (see Old Murdoch, new News from 25 Jul 13 (Speculative Buy – $17.00)). News’ 61.1% stake in REA is currently worth about $3.9bn, representing about a third of News’ $11bn market capitalisation.
Note: Our model Growth Portfolio owns shares in Carsales.com and News Corp, while our Income Portfolio owns shares in Carsales.com.