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
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%.
REVENUE
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.
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.