A new technology share is listing Thursday on the ASX for a company that you've probably used sometime in the last 17 years.
Australian tradesperson matching site Hipages Group Holdings Limited (ASX: HPG) is floating this week with a market capitalisation of $318.5 million. The company has raised more than $100 million in the initial public offer (IPO), at $2.45 per share.
Hipages is a website and mobile app where any Australian can post a task to be done, and tradies will bid to do the work.
Despite its evolution over 2 decades, the original intent for the site remains remarkably intact.
In the early 2000s, co-founder and chief executive Roby Sharon-Zipser and his wife bought a flat just after they married. It required extensive renovations and Sharon-Zipser was intimidated by what they had got themselves into.
"I didn't know how to project manage, I didn't know if I could trust the tradies, I didn't know where to get the tradies, I didn't know how to pay the tradies," he told The Motley Fool.
"It was really complicated and we were unhappy. I thought there had to be a business opportunity there."
He then started to research a business case, which led to a surprising finding.
"Interestingly enough, when I spoke to tradies they were really unhappy as well," he said.
"They didn't really understand how to market themselves online. A lot of the technologies and search engines were just getting started. They found it really frustrating – they had a lot of people trying to sell them really expensive products."
Why the IPO now?
Institutional investors have asked Sharon-Zipser many times about the timing of going public.
Rather than third party factors like the market's current thirst for tech, public perception of the company and industry maturation were key.
"We've started to get the right level of brand awareness. People are now familiar with the technology," he said.
"We're at the cusp of technology adoption for what was relatively an unsophisticated category, now wanting to take on technology. And we've seen an acceleration of that with COVID-19."
The Hipages name has also been boosted by its commercial relationship with the hit television renovation show The Block.
What's Hipages' moat?
The competitive advantage for Hipages, Sharon-Zipser believes, is that it has few rivals.
"We're the only platform in Australia totally dedicated to home improvements and home services – and at scale."
Hipages does have younger rivals such as ServiceSeeking. But Sharon-Zipser said there are no shortcuts in building a substantial directory business, so its first-mover advantage is invaluable.
"We're talking 10 to 20 years… it takes a huge amount of time to build up a network of trades across the country. And we've done that."
Media giant News Corporation (ASX: NWS) evidently agreed, buying a reported $40 million stake back in December 2015.
Just before the IPO, that piece was worth 30%. Upon the ASX listing on Thursday, News Corp will own 25.7% of all Hipages shares, now worth $81.8 million.
Hipages' revenue comes from monthly subscription fees from tradies. There is no cost for consumers.
In financial year 2020, the company raked in $46.9 million in revenue, with a net loss of $4.16 million. Pro forma forecast for the current year is $53.9 million revenue and a $1.75 million net loss.
Hipages' growth prospects
Sharon-Zipser told The Motley Fool the company has no immediate plans to expand outside Australia.
Apparently his team has a full plate already.
"There are 257,000 trade businesses in Australia. We have 36,000 of them purchasing product off us. We see massive opportunity still in the domestic market."
As icing on the cake, COVID-19 pandemic's impact on the home improvements industry was a complete surprise.
"To be fair, I didn't expect the surge that we're seeing," said Sharon-Zipser.
"We all saw a little bit of a wobble in March… But the recovery and turnaround within weeks was a little unexpected."
