PropTech Group Ltd - Tracking Ahead of Our H2 FY22 Cashflow Forecasts
PropTech Group Ltd
Tracking ahead of our H2 FY22 cashflow forecasts
PropTech Group (ASX:PTG) is a property technology SaaS company with a fast- growing and market-leading position in customer relationship management (CRM) systems with Australian and New Zealand residential real estate agents, and a small but growing position in the UK market. PTG has reported a 70% increase in Q3 cash receipts to $5.32m and positive operating cashflow of $0.43m. Operating cash costs were $4.89m for the quarter, with particularly good cost containment in employee and administrative/corporate expenses. Cash receipts are tracking a little ahead of our H2 FY22 forecasts and operating cash costs are tracking well below our forecasts for the half. PropTech Group ended the quarter with $14.59m in net cash. We have made no adjustments to our forecasts for the quarter. As we discussed in our report of 7 April 2022, PropTech Group is trading at a significant discount to its listed Australian peers and to recent transactions in the sector. The peers are trading on an EV/Sales median, based on FY21 revenues, of 9.0x and a forward EV/Sales multiple of 7.4x. PTG is currently trading at a ~60% discount to both its peers on a forward multiple and recent transaction multiples, underscoring its relative value.
Business model
PropTech Group operates a subscription-based, software-as-a-service (SaaS) model for both business-to-business (B2B) and business-to-consumer (B2C) customers in the residential property markets in Australia, New Zealand and the UK. PropTech is also leveraging its role in the real estate lifecycle to develop new revenue streams from payments (via its PropPay JV) and ancillary services. The company generates the bulk of its sales revenues (~90% of revenues in FY21) from real estate agents. Around 41% of agency offices in Australia and New Zealand use one or more of PropTech’s products. In the UK, it’s just under 1% of agents. We estimate PropTech’s share of transactions flowing through its platform is closer to 50% of the ANZ market.
Strong growth in annualised recurring revenues
PropTech Group has reported a 56% increase in annualised recurring revenues (ARR) to $18.0m when compared to the same quarter in FY21 and a 6% increase over Q2 FY22. The company has also lifted average revenue per account (ARPA) by 30% to $258 on the previous corresponding period (pcp) and unique accounts by 26% to 5,125 at the end of Q3 FY22. Both metrics are tracking a little ahead of our forecasts for H2 FY22 and underpin our confidence in our H2 FY22 forecasts, which remain unchanged. Products per account increased 3.2% to 1.91, up from 1.85 in Q2 FY22 and 1.05 in December 2020. Cash receipts for the quarter were $5.32m, up 69% on the same quarter a year ago. Recurring cash receipts were $4.7m and accounted for 90% of total cash receipts. Q3 was PropTech Group’s fifth consecutive quarter of positive operating cashflow.
Base-case DCF valuation is $1.27/share
We value PropTech Group using the discounted cashflow method given the relatively early stage in its lifecycle. Our base-case valuation implies an EV/Sales multiple of 9.0x FY22 revenues, however the current share price implies a forward multiple of 2.7x which is significantly below its peer group and recent private transactions.
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