Purplebricks Group (AIM:PURP) - the valuation still looks bonkers to us!
The highly rated online estate agency Purplebricks Group, has arrived on AIM at an eye watering market capitalisation of £240m. We commented back in November how the suggested valuation looked totally bonkers to us for a business that only started a year or so ago and it will be interesting to see how they progress in the public eye. One can assume that traditional estate agents will also be upping their game (or simply reducing their fees!) to counter this new threat. Research house Hardman & Co has issued a supportive research report hinting that the current valuation might actually represent a decent buying opportunity, we offer our thoughts below.
Hardman’s research offers some fairly sweeping statements such as how, since launching in April 2014, Purplebricks has captured over 60% of the online market and become the 4th largest UK estate agent. We struggle to understand this comment when the Group generate income of only £3.4m for the year ending 2015 and is forecast to generate revenue of only £17.8m for the year ending April 2016. It looks even more far-fetched when the UK estate agency market is estimated to generate £4.4bn of fees per annum, excluding the additional fees from lettings activity. Their assessment of market share appears to…