What’s new: This morning OnTheMarket Plc (LON:OTMP) announced that the largest property franchise, Belvoir Lettings, (“Belvoir”), has agreed to advertise all UK residential sales and lettings on OTM.
Belvoir has a network of 300 franchised lettings and estate agents. A number of Belvoir franchisees are already on OTM. This agreement means that all the franchisees will list their properties on OTM.
Dorian Gonsalves, Belvoir CEO, says: “We have for some time believed that the property portals landscape was ripe for disruption.
“OnTheMarket is the first serious contender for several years to be injecting genuine competition in the interests of agents and property-searchers alike.
“It is agents who provide the portals with the majority of their content and income. It is also agents who serve their clients and property-searchers on the ground in selling, letting, buying and renting property.
“I’m very pleased to be announcing our strategic support for OnTheMarket as an agent-backed business and am confident that with agent momentum building it will continue to go from strength to strength”.
Zeus view: The signing of an agreement with a large corporate, Belvoir, is very encouraging. Having established a large market share with smaller agents, we expect further agreements with large corporates to be signed over the coming months.
It is clear that “network effects” are increasingly benefiting estate agents on OTM. With double the number of agent branches listing on OTM, the stock of properties listed on OTM has doubled. Double the number of listings will have helped increase the number of visits 3-fold and the number of leads to OTM estate agents 4-fold.
Significantly increased marketing spend by OTM will have also helped the “network effects”. The addition of Belvoir’s listings will also add to the “Network effects”.
We make no changes to our forecasts, which are set out overleaf (Exhibit 1).
Equity value/office: In our opinion, equity market value per office (i.e. agent branch) is a useful indicator of value. At 137p a share OTM has over 60% market share and is trading on an equity market cap of £84m, which is under £7.5k/office.
In our previous research we observed that “by 2020-21, with the portal delivering an EBIT margin of over 30%, we would expect Onthemarket to trade on over £20k/office, which would be consistent with a fully diluted share price of over 330p a share”.