Asian property website operator iProperty Group Ltd (ASX: IPP) couldn't escape the market sell-off even as management posted a big improvement in first half profit and said it was on track to deliver a record full year revenue for 2015.
The stock tumbled 2.7% to $2.87 in late morning trade after iProperty unveiled a 37% increase in sales to $15.1 million for the six months to end June 2015 and earnings before interest, tax, depreciation and amortisation (EBITDA) of $700,000 compared to a figure of $30,000 that it posted at the same time last year.
The group is now profitable on four out of its six segments. The four are Malaysia, Hong Kong, Thailand and international project marketing. The performance of Hong Kong and Thailand has been bolstered by recent acquisitions, while Malaysia generated record revenues of $9.4 million as iProperty is the market leader in that country with an 85% market share.
What's more, the group has also delivered a significant improvement across its operating metrics with average online revenue per development (which is the average fees property developers pay iProperty to promote the development) jumping 91% to $963, while unique visitors to its websites lifted 21% to 4 million.
iProperty has plenty of room to grow as the population of Indonesia (one of its key markets) alone is 250 million.
However, one area that might concern investors is the rather slow growth of paying agents for the site. This group has only grown 6% over the period to 35,380.
This is essentially what distinguishes iProperty to its local peer REA Group Limited (ASX: REA). While property agents in Australia are heavy advertisers willing to pay recurring fees to advertise inventory, it is not the same for Asia where property developers tend to drive advertising. But property developers are probably not as heavy users of online classifieds.
Another negative is the high premium iProperty trades at. Based on consensus forecasts, the stock is trading on a 2016 price-earnings multiple that's close to 60x.
However, longer-term investors shouldn't be too focused on this if they believe that online property classifieds will dominate in Asia as they have here in Australia.
iProperty is in the box seat of this revolution and its market cap of $540 million alone suggests there's significant upside to the stock if it can establish itself as a market leader in another two Asian markets.
Management is forecasting revenue of $32.5 million to $36 million and EBITDA of between $3 million and $6 million for 2015 (its financial year is the same as the calendar year).
