What’s new: OnTheMarket plc (LON:OTMP) will provide a “payment support initiative for its agent customers to help ease the anticipated impact of the evolving COVID-19 situation.”
”To help reduce the cash flow pressure which agents are expected to face, OnTheMarket is introducing a 33% listing fee discount for invoices issued in the 3 months starting April 2020. This discount will be given to all OnTheMarket agent customers who are paying on full-tariff listing agreements.”
“It is too early to give guidance on the potential impact of COVID-19 on [the Group‘s] results for the current financial year to 31 January 2021. While revenues may be impacted in the short term, the Group will preserve cash through the careful management of costs.“
Clive Beattie, Acting Chief Executive Officer, commented: “OnTheMarket exists because agents had the foresight to want their own portal in order to control their online marketing cost base.“ He added “[OnTheMarket] is the agents’ portal. We understand the next few months are going to be tough and, as such, … we believe that offering this discount early will assist agents to control their costs in the face of such uncertain times.”
Zeus view: This announcement shows OTM understands its paying customer base. Unlike the “deferral” of fees by its larger peer, OTM‘s “discount for 3 months” is given to all full-tariff listing agreements.
We estimate the revenue impact should be <5% (nb 33% for 3 months on £18.5m is £1.5m, which is 5.2% of FY21 revenue). As OTM will “preserve cash through careful management of costs”, we maintain forecast EBITDA and adj PBT.
In a previous announcement on 9 March 2020 OnTheMarket revealed:
1. Cash on 31 January 2020 was £8.7m (compared to our forecast of £8.0m)
2. Revenues are slightly above £18.0m to £18.5m guidance (Zeus: £18.5m)
3. Better than expected adjusted EBITDA
We maintain our forecasts and will fine tune forecasts when results are reported.
Valuation: OTM has substantial net cash of over £8m, a capital light business model, long-term contracted revenues and an ability to manage its costs to preserve cash. In our opinion, OTM has the cash resources and agent support to reach breakeven in the current year and towards a 20%+ operating margin.
We estimate OTMP is trading on P/revenue of 1.6x falling to 1.2x for FY(Jan)21E and 1.0x for the following year. This is exceptionally low for a Portal.
