Asia-focused online property website operator iProperty Group Ltd (ASX: IPP) opened 4.7% higher in morning trade after posting a positive quarterly cash flow framed against strong revenue growth in its core Asia markets.
The group owns leading online property websites in fast-developing Asian countries like Thailand, Malaysia, Hong King and Singapore, where property is as potent an asset class as anywhere else.
Handsome outlook
Unfortunately, its potential is no secret with investors ascribing it a market value around $520 million, despite a positive net cash flow of just $100,000 for the first quarter of 2015.
However, the business is now profitable in 3 out of its 5 operating regions and posted collections of $7.5 million for the quarter, up 41% over the prior corresponding period. That's strong growth, but not exactly gangbusters given it is coming off a small base and the investment case for the business remains leveraged to the size of the market opportunity ahead of it.
Growth sweet spot
The group is part owned by local online property phenomenon REA Group Limited (ASX: REA) and will have a bright future if able to follow REA Group's recipe for success.
REA Group's realestate.com.au operation has built a money-spinning position in Australia as its dominant website enjoys the benefit of the network effect where buyers and sellers naturally gravitate to the most popular venue for trading goods.
REA Group is part owned by News Corp (ASX: NWS) and a textbook example of how much money is to be made via the migration of classified advertising revenues online from the pages of old world media newspapers and magazines.
It seems News Corp has successfully hitched its wagon to the globalisation of REA Group in this regard, while in Australia Fairfax Media Limited (ASX: FXJ) is investing heavily in its domain.com website as a digital rival to realeastate.com.au.
Fairfax has some catching up to do however, although strategic growth via its heavy investment in domain.com looks its strongest card in carving out a profitable and growing role in the digital future.
Speculative buy
Today iProperty sells for $2.97 and it's not impossible that REA Group may launch a takeover bid for the business if it turns consistently profitable. In this event REA Group would likely have to stump up a significant premium if iProperty started to deliver on its eye-watering growth potential.
In my opinion iProperty looks a speculative buy supported by several tailwinds and some powerful backers. However, there's another internet business growing in Asia that's already growing profits fast and paying out piles of cash in dividend income.
