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OnTheMarket continues to grow as branches come off Rightmove

What’s new: Rightmove interims show 6.0% YoY fall in agent branches to 15,727 (June 2019: 16,768; June 2018: 17,585): 3.5% fall YTD. Over the past two years while Rightmove lost 1,858 branches, OnTheMarket plc (LON:OTMP) gained 1,619 exclusive branches, many of which are encouraging others to leave Rightmove.

Recent news from OnTheMarket:

  • Visits to OnTheMarket exceeded 27m for July (June: 25m).
  • OnTheMarket delivered over 2m leads in July and 1.8m leads in June. This is an average of 148 and 134 leads per advertiser respectively (compare: average of 94 leads per advertiser last year).
  • 30 June 2020, OnTheMarket’s total advertisers* reached almost 14,000.
  • 1,619 agent branches list exclusively with OnTheMarket (up 42% yoy). 

includes new home developments, as well as estate and lettings agent branches

Lancastrian sales and lettings agent Lizzy Thompson, Director of Broden Lloyd, wrote in July: “We have been with OnTheMarket since the beginning but are now listing exclusively with them after coming off Rightmove …. at the turn of the year and it’s been great. … For months before dropping Rightmove, we monitored the level of leads coming through …. and OnTheMarket was greater. … We’re saving lots of money … [and] …  recommend listing only with OnTheMarket.”

Zeus view: Rightmove is no longer “whole of market”. Assuming total market of 18,200 branches: Rightmove covers 87% of the market; 70% of the remaining 13% is covered by branches exclusive to OnTheMarket. Rightmove‘s loss of branches, appears to be OnTheMarket‘s gain.

Rightmove reports a 3% YoY rise in leads and 50% fall in ARPA to £338 due to the discount provided (75% discount for April, May, June and July 2020; 60% discount in August and 40% in September for England and higher in Scotland and Wales). Without this discount we estimate Rightmove provides agency branches less than half the number of leads per £100 spend than OnTheMarket.  

Valuation: OnTheMarket has c. £9.4m (13.2p per share) of net cash, a capital light business model, long-term contracted revenues and an ability to manage its costs to conserve cash. In the first 5 months of FY(Jan)21, OTM generated 1.0p per share of cash.

OnTheMarket is well positioned to grow organically, as its portal offering provides advertisers a “higher marketing yield” than higher-priced-alternative-portals. The number of subscription paying advertisers contracted to OnTheMarket continues to grow. As paying advertisers rise and discounts fall away, contracted revenues will rise and in 2021 calendar year OTMP stock should report profits.

OnTheMarket is trading on 3.5x historic and 3.6x current year price/revenue. Excluding net cash OTMP’s price/revenue multiples fall to 3.1x and 3.2x. Stocks on price/revenue of 3.0x, with 25% operating margin, trade on PER of 15x.

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