PropertyGuru Group Ltd – Dominant Property Platform September 26, 2022 685

PSR Recommendation: BUY Status: Initiation
Target Price: USD5.73
  • Dominant market presence in Singapore/Vietnam/Malaysia. Around 41% of revenue is from current agent subscription fees with a 82% renewal rate.
  • Pricing power and increasing customer spend through premium products are drivers for the expected revenue CAGR of 37% over the next two years.
  • Initiate coverage with a BUY recommendation and DCF-based target price (WACC 10.1%, g 3.0%) of US$5.73.


Company Background

PropertyGuru Group Ltd. (PGRU) operates a digital real estate marketplace focusing mainly on Southeast Asian markets (Singapore, Vietnam, Malaysia, Thailand, Indonesia) serving property seekers, real estate agents, property developers, and banks & valuers. Its core business segments are Marketplaces, which is a property listing portal (97% of FY21 revenue), and Fintech and Data Services, which offers mortgage broking products, market intelligence and workflow automation platform (3% of FY21 revenue).


Investment Highlights

  1. Dominant presence in property marketplace. PGRU is the leading online property marketplace platform in Southeast Asia, with >64,000 monthly agent customers, ~40 million monthly property seekers, and >3.5 million property listings on its platform – dominating the region with 76%/96%/75% market share in Singapore/Malaysia/Vietnam respectively. Revenue grew at a 4-YR CAGR of 22% from S$45mn in FY17 to S$101mn in FY21, and this is expected to grow at a 2-YR CAGR of 37% through FY23e because of increased premium product adoption by agent customers. We view the company’s dominance in the market will pose as a significant challenge for new entrants attempting to compete for market share due to the network effects resulting from high penetration of agents and home seekers on its platform.
  2. Strong pricing power with increasing renewal rate. PGRU is able to command premium prices on its products compared to other competitors, with its standard subscription tier costing 43% more than its biggest competitor, while still achieving ~82% renewal rate from agents in 1H22. This will allow the company to grow its revenue by incrementally increasing its prices in the future, especially when agents are likely to face high cost of switching due to home seekers being accustomed to using PGRU’s platform. PGRU is also focusing on increasing operating leverage, reducing variable costs by minimizing headcount increase, to achieve higher margins moving forward.
  3. Business resilient through property cycles. PGRU’s revenue is shielded from market downturns due to their annual subscription model, with agents likely to increase spendings on discretionary products, such as exposure booster, during weak property market periods as they try to boost their listings visibility. Revenue from agent discretionary products made up 53% of total agents revenue in 1H22, up from 45% in 1H21, with total revenue from agents increasing 45% YoY even as private residential sale volumes in Singapore were down 27%. We view the resilient performance as a signal that external factors have little impact on PGRU’s ability to generate stable earnings moving forward.


We Initiate coverage with a BUY rating and a target price of US$5.73 based on DCF valuation, with a WACC of 10.1% and terminal growth of 3%.



PGRU posted S$101mn in revenue for FY21 – increasing 23% YoY, with 97% of its total revenue coming from its Marketplaces segment and 3% from its Fintech & Data Services segment (Figure 1).


Marketplaces: Marketplaces is PGRU’s main business segment where it operates an online property classified listing portal. The platform allows property buyers/tenants to look for and real estate agents/developers to list available properties and new developments. PGRU earns revenue by: 1) charging property agents tiered annual subscription fees in Singapore, Malaysia, Thailand, and Indonesia; 2) per listing fees in Vietnam; 3) additional fees for optional features and add-ons across all markets; 4) charging developers digital advertising fees; and 5) software-as-a-service (SaaS) sales for process automation solution.


The main metrics used to track performance in this segment are Average Revenue per Agent (ARPA) and Average Revenue per Listing (ARPL). ARPA is applicable for agent revenues across all markets, except Vietnam, while ARPL is applicable for agent revenues specifically only for Vietnam.


Revenue from this segment was S$97.9mn for FY21, increasing 21% YoY. Singapore was the biggest contributor to the segment, making up 57% of the Marketplaces revenue, followed by Vietnam making up 19% (Figure 1). Singapore ARPA has increased quarter-on-quarter (QoQ) driven by increase in premium product adoption and subscription price in 4Q21 while Vietnam’s ARPL also grew QoQ as a result of increase in number of listings and penetration of premium services.


Fintech & Data Services: Launched in FY20, PGRU’s Fintech segment provides mortgage brokering services, which currently is available only in Singapore, by matching home buyers with suitable mortgages that are advertised by banks. The company has referral arrangements with major banks in Singapore and it earns revenue by: 1) charging financial institutions commissions on mortgage fulfillment; and 2) digital advertising fees.


Aside from mortgage brokering, PGRU also has data & software business (Data Services) where it provides B2B clients (including property valuers, banks, developers, agencies, auditors and consultancies) access to its proprietary information on the real eastate market and workflow automation solutions. Revenue is earned by charging clients subscription fees for platform usage.


Mortgage brokering business performance is measured by the amount of take rate, while the data services business is measure by the average price charged per consumer. Both Fintech and Data Services segments combined for a revenue of S$2.9mn in FY21, growing 179% YoY.


Revenue Growth: We forecast total revenue for FY22e to hit S$145mn, which would represent a 44% YoY growth, mainly driven by PGRU’s dominant presence that would enable it to continue capture demand, especially from new property agents entering the industry, and its strong pricing power coupled with high subscription renewal rate. Growth is also driven by agents’ increased adoption of premium subscription tiers and spending on discretionary products.

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About the author

Profile photo of Maximilian Koeswoyo

Maximilian Koeswoyo
Research Analyst

Maximilian mainly covers the US technology sector. In his strive to be a globalized citizen and get continuous exposure to the fundamentals of companies from various industries, he graduated from Singapore Management University holding a Bachelor’s degree in Business Management.

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