OnTheMarket “is playing a major role in the increase in residential property market activity” says Zeus Capital

OnTheMarket plc (LON:OTMP) has announced record leads to advertisers during August 2020 and increased cash balance of £10m. Key points are:

  • OnTheMarket delivered more than 2m leads in August 2020 (up 64% year on year);
  • Leads per Advertiser in August 2020 was 149, compared to 134 in June 2020 and 126 In January 2020
  • Visits to OnTheMarket reached 27.5m, which compares to an average of 26.8m for the past 3 months.
  • Drivers of the increase in traffic include OnTheMarket’s “New & exclusive” properties … together with properties of those agents listing exclusively with OnTheMarket.
  • As of the end of August, OnTheMarket’s net cash balance stood at £10m, an increase of £0.6m compared to the end of June, … the Company has continued to take a disciplined approach to managing its cost base and cash position, including a significant reduction in marketing expenditure.

Clive Beattie, Acting CEO, said: “We are consistently driving strong leads while our consumer awareness is growing and these record numbers show how many serious buyers we are attracting to the site. Our focus remains on driving performance and delivering value for our agent shareholders and the strength of OnTheMarket’s on-going traffic shows a sustainable platform for future growth.”

Zeus view: OnTheMarket is playing a major role in the increase in residential property market activity. During the recovery in property market activity, Agents experience working capital strain, and should appreciate OnTheMarket’s cost efficient approach to advertising UK residential property.

We are pleased to see OTM generating cash in August 2020, despite the discounts provided to Advertisers. When OTM’s discounts unwind next year, OTM’s cash generation will rise.

We make no change to our forecasts. Interims due in October should provide the basis for setting forecasts for 2021.  

Valuation: OnTheMarket has c. £10m (13.9p per share) of net cash, a capital light business model, long-term contracted revenues and an ability to manage its costs to conserve cash. In the first 7 months of FY(Jan)21, OTM generated 1.8p per share of cash.

OTMP, at 87.6p, is trading on 3.0x historic and 3.1x current year price/revenue. Excluding net cash OTMP’s price/revenue multiples fall to 2.5x and 2.6x. Stocks on price/revenue of 3.0x, with 25% operating margin, trade on PER of 15x.

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