Zeus PB Valuation Sept. 201712 Apr 2018 12:11
Q3: Shares are currently trading at just over 400p, valuing the company at nearly �1.1 billion, how important is the USA division to the investment case?
A3: I estimate the opportunity in the USA is over 10 times the opportunity in the UK because the population in the US is greater, the revenue per transaction is greater and the market is even more fragmented than in the UK. The opportunity in Australia is approximately the same as the UK because although the Australian population is half the UK the revenue per transaction is over twice the UK.
So, in short, Purplebricks UK has over 30,000 properties on their website at the moment available for sale or where there�s indication of an offer being made, and is forecast to generate around about �80 million of revenue this year and an EBITDA of about �15 million for this year, �30 million EBITDA next year, �45 million the year after. Arguably, the UK business is worth well over �450 million based off forecasts for the period to March 2020 and you can probably think it�s around about �370 million valuation or 137p a share now.
So, you�ve got the Australian business which is arguably worth a similar amount but you need to discount that back two years because Australia is two years younger than the UK. So, using a 10% discount rate, obviously individual investors can choose their own, the value of that business is probably around about �1.13.
In total, those two businesses are probably worth �2.50 out of the current share price of �4.00 so I estimate the US business is implicitly valued at �1.50 a share and it�s got 30 LREEs but clearly that�s going to be growing and I think that valuation is low relative to its potential. One has to recognise that at this particular moment, it is not producing revenue and not producing EBITDA yet.
I suggest investors interested in Purplebricks keep an eye on the USA section of their website.
Discuss....
For the UK, do people see "generate around about �80 million of revenue this year and an EBITDA of about �15 million for this year, �30 million EBITDA next year, �45 million the year after. Arguably, the UK business is worth well over �450 million based off forecasts for the period to March 2020 and you can probably think it�s around about �370 million valuation or 137p a share now."
Are current growth rates enough to generate an EBITDA that is double this years for 2019?
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