Online property portal Zoopla (ZPLA) is catching up with peer Rightmove (RMV) on valuation as it posts better-than-expected full year results.
The shares are up 6.7% to 340.3p and now trade on an enterprise value to earnings before interest, tax, depreciation and amortisation (EV/EBITDA) ratio of 18.3 times, against its larger peer on 18.9 times.
Zoopla has traded at a discount to Rightmove due to the latter’s dominance of the market but investors seem to be warming to the potential in Zoopla’s ancillary businesses.
Pre-tax profit for the 12 months to 30 September is up 38% year-on-year to £46.2m on revenue up 84% to £197.7m (vs a consensus forecast of £190.3m).
The company continues to win back estate agents from challenger OnTheMarket, whose competitive edge has blunted since its launch in January 2015, with membership up 5%.
It has also built on its property listings website through the acquisition of utilities comparison site uSwitch, for £160m in April 2015, and Property Software Group, for £75m in April 2016.
Founder and chief executive Alex Chesterman says: ‘The acquisition of Property Software Group has been transformational, allowing us to offer the UK’s only end-to-end solution for property professionals including software, workflow, CRM and marketing tools.’
The company has added further to this capability, announcing alongside the results the capture of estate agency website design business Technicweb and a partnership with home insurance provider Neos.
Liberum, which recently initiated on Zoopla with a ‘buy’ recommendation and 415p price target, highlights some of the growth levers it can pull.
‘Zoopla.co.uk has an audience of c.11m unique users per month. Whilst most of these users don't transact, uSwitch could potentially monetise this traffic. If they drive 50% of this traffic and deliver a 5% of this traffic they could boost FY'17 EPS by 13%.
‘There are c.3,000 users who currently use PSG (Property Software Group) products but do not use Zoopla products. If ZPG were to convert these users to Zoopla users this could lead to an 11% uplift in FY'17 adj. EPS.’
