Small Caps | Apr 13 2015
-Acquisitions contributing strongly
-Ambitions may require more funds
-Price increases planned
By Eva Brocklehurst
Real estate online portal iProperty ((IPP)) remains on track to achieve its guidance, with a cash balance now standing at $6.0m in the March quarter. Cash receipts of $7.5m were up 41% on the same period last year and above broker forecasts. iProperty is developing a strong presence in Asia. Most of its business is conducted in Malaysia but the company also has a substantial offering in Hong Kong and its Indonesian business is growing.
The company's quarterly update suggests full year guidance of $30-36m in revenue will be achieved. The strong quarter was driven by a positive contribution from the Malaysian/Indonesian developer business and a contribution from Squarefoot.hk, which was acquired recently.
Canaccord Genuity expects second quarter cash flow will be positively affected by the incorporation of ThinkofLiving.com, along with the recent price rises from certain depth products in Malaysia and Indonesia. ThinkofLiving.com, based in Thailand, will contribute cash collections of around $400-500,000 per quarter for the first time in the June quarter. Countering this uplift, Canaccord Genuity notes, could be the introduction of a goods and services tax in Malaysia in April.
While the company is breaking even and there is no immediate need for capital, the broker is of the belief that long-term growth ambitions will require further funds beyond the current cash balance. Canaccord Genuity retains a Hold rating and $3.02 target.
Morgans also considers iProperty off to a flying start in 2015 and has an Add rating and $3.65 target. The broker believes the company is just beginning to enjoy the benefits of its dominance in Malaysia and Hong Kong. While Morgans urges caution in interpreting inflows, if the trends witnessed in the first quarter are sustained, the company is expected to meet the upper end of its revenue guidance. Of the $1.9m increase in organic revenue in the first quarter compared with the fourth quarter of 2014, the increase was split between developers and agents on a 60:40 basis. This strength in developer spending reflects new projects and a better conversion rate by iProperty, in the broker's view.
Morgans observes there was little benefit from price rises during the March quarter but iProperty has increased subscription prices in Malaysia and Hong Kong and is planning a hefty increase in depth product prices in Indonesia from July.
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