OnTheMarket Plc (LON:OTMP) has released details of the increase in stock of properties, visit traffic, and leads to agents since February 2018:
On 31 January, OTM listed 600,000 UK residential properties: this is over 80% of Zoopla’s and 60% of Rightmove’s stock of listings;
In January 2019, OTM had 23.5 million visits, which is over 4x the visits to OTM in February 2018;
In January OTM provided estate agents more than 7x the leads it provided its estate agent customers in February 2018;
1.5m active property alerts is further evidence of consumer engagement with OTM.
Zeus view. OTM’s network effects are strengthening. Its interims in October stated: “Compared with February 2018 when [its] IPO took place OnTheMarket has doubled offices and properties listed, trebled monthly traffic and quadrupled email and telephone leads to agents.” Over a full year, OTM has increased its offices by over 127%, quadrupled the number of visits and increased leads 7x.
The number of quality-leads compared to the fees paid by Estate Agents (i.e. the cost per quality-lead) is the important number for each business. Low cost per quality-lead should encourage Agents on a “First Year Free” contract to sign long-term contracts and should further encourage Agents already on long-term contracts to support OTM.
Agent testimonials provide evidence of numbers and quality:
“leads supplied to us is not far off 50/50 between Rightmove and OTM”;
“we are getting 60% of our leads from OTM and 40% from Rightmove. More importantly, the conversion rate is better than Rightmove’s.”
“We consistently get more good quality leads from OTM than from any other portal.”
Support from paying customers is an important indicator of future revenue growth.
Valuation: Equity value/office. In our opinion equity market value per office is a useful indicator. At 93p a share OTM has over 12,500 offices and is trading on an equity market cap of £57.2m (i.e. only £4.6k/office; Rightmove is trading on £230k/office), which does not reflect the value of these relationships which we estimate to be more than £20k/office.
By 2020-21, with the portal delivering an EBIT margin of over 30%, we would expect OTM to trade on over £20k/office, which would be consistent with a fully diluted share price of over 300p a share.