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Purplebricks valuation is ‘totally bonkers’, says investment site

fIXFLO news story

An investment site has described Purplebricks’ valuation as “wacky” and “totally bonkers” – and tipped The Property Franchise Company instead.

The Property Franchise Company includes Martin & Co and online firm EweMove.

Investor’s Champion did, however, praise Purplebricks – whose shares yesterday hit an all-time high after announcing plans to launch in America – for its “can do” attitude

It also noted that it previously described Purplebricks’ valuation as crazy – “and the shares have more than doubled since!”

Separately, it appears that Purplebricks has already appointed a CEO in America. He is Eric Eckardt, 42, a licensed New York real estate broker, whose impressive CV includes online agents. He launched DwellOwner, a ‘full service’ hybrid agent, in only the third quarter of last year, and before that ran Hubzu, an online agent based in Luxembourg. His Linked In profile is here: https://www.linkedin.com/in/ericeckardt/

He may want to read the Investor’s Champion blog, which said: “Broker forecasts are practically worthless as nobody really knows where this business [Purplebricks] could go to. However, let’s be really optimistic and assume revenue for the year ending April 2019 could hit £160m (estimates were for £123m).

“A gross profit margin of 60% would see gross profit of £96m and pre-tax profit of approximately £50m and net approximately £42m – this is wildly optimistic!

“The multiple of approximately 17x doesn’t look too rich on those sums but we have ignored start-up costs for the US and accelerated marketing costs to build a presence there, not to mention increasing competition in the UK – after all, the competition isn’t going to lie down.

“This is a transactional based business that will rely on ongoing marketing to keep it in the spotlight. It’s not like those other star unicorns Uber and Airbnb where the same consumer returns multiple times to use their service.

“The market opportunity is big and the estate agency market evidently needs shaking up but we struggle to understand the barriers to entry with what appears to encompass relatively simple technology.”

Wondering how US realtors will react to Purplebricks, Investor’s Champion says that those wanting cheaper exposure to an online estate agency offering should look at The Property Franchise Group.

EweMove, which was acquired last September, comes top on Trustpilot and, says Investor’s Champion, “a web search for our area revealed that EweMove carried several more listings” than Purplebricks.

The Property Franchise Group is “a nice profitable business at a modest valuation with the excitement of a Purplebricks type of offering in their EweMove Business,” is the conclusion.

Yesterday, shares in Martinco (as it is known on the stock market) rose 1.9p (1.36%) to 141.40, giving it a market capitalisation of £35.29m.

Shares in Purplebricks finished the day at 267p, up 41p (18%), giving it a market capitalisation of £661m. At one stage yesterday, the shares hit 270p.

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