OnTheMarket delivering revenue growth plus EBITDA margin which exceeds 40% says Zeus Capital

OnTheMarket

OnTheMarket plc (LON:OTMP) trading update reveals “Group’s operational performance has continued to be strong” with continued “focus on disciplined operational and cost management.”

Key points include:

  • FY(Jan)22 revenue “expected to be slightly ahead of market consensus” (Bloomberg: £30.45m)
  • Cost of new website and brand launch “capitalised rather than expensed”
  • FY(Jan)22 Group adjusted operating profit “will be at least £2.5m”

Outlook: “The Directors believe the outlook for the Group is unchanged to that announced in its interim results on 12 October 2021”.

Next update: OnTheMarket will provide “a further update in a post year-end trading update in late February.”

Zeus view: We adjust our FY(Jan)22 forecast as follows:

  • Nudged revenue up £0.1m to £30.5m
  • Raised adj PBT 19.0% from £2.1m to £2.5m
  • Raised EBITDA 8.2% from £4.9m to £5.3m
  • Cut overheads 2.1% from £14.4m to £14.1m
  • Made no change to forecast cash at year end

Current year profitability improves: EBITDA margin rises 131 basis points from 16.1% to 17.4%.

We will review our forecast for FY(Jan)23 after its trading update in late February.

Valuation: Sales multiples provide a clear guide to fair value (see our 12 October 2021 research note) showing the link of sales multiples to cash generation.

OnTheMarket, with long-term contracted subscription revenues, is delivering revenue growth plus EBITDA margin which exceeds 40%.

This year we expect 32% revenue growth and 17% EBITDA margin (i.e. 49% combined); next year we forecast 19% revenue growth and 21% EBITDA margin (i.e. 40% combined).

At 119p, with 13p of cash, OnTheMarket is trading on current year EV/sales of 2.8x and 2.4x next year. Investors confident OTMP will operate to the “rule of 40”, should expect OTMP to trade on over 6x sales (i.e. c 226p a share.

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