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Based in Denver, CO, RE/MAX Holdings (NYSE:RMAX) scheduled a $200 million IPO with a market capitalization of $600 million at a price range mid-point of $20, for Wednesday, October 2, 2013.

Six IPOs are scheduled for this week. The full IPO calendar can be found at IPOpremium.

S-1 filed September 19, 2013.

Manager, Joint Managers: Morgan Stanley, BofA Merrill, JPMorgan
Co-managers: William Blair, RBC Capital, JMP Securities

Summary

RMAX is one of the world's leading franchisors of real estate brokerage services. Franchisees operate under the RE/MAX brand name which has held the number one market share in the U.S. and Canada since 1999 as measured by total residential transaction sides completed by agents.

RMAX expects to pay dividends at an annual rate of 1.25% at the price range mid-point of $20.

Valuation

Valuation Ratios

IPO Mrkt

Price /

Price /

Price /

Price /

Profit

annualizing June 6 mos '13

Cap (mm)

Sls

Erngs

BkVlue

TanBV

margin %

RE/MAX Holdings (RMAX)

$600

3.7

19.7

2.4

4.3

33%

Compare

RE/MAX Holdings (RMAX)

$600

3.7

19.7

2.4

4.3

19%

Realogy Holdings (NYSE:RLGY)

$6,260

1.3

347.8

4.1

-1.4

3%

Glossary

Conclusion

Buy RMAX on the IPO, because it has a very established brand, is profitable and at the price range mid-point of its 20 times annualized earnings. Plus RMAX appears to be at a substantial discount to RLGY.

To put the conclusions and observations in context, the following is reorganized, edited and summarized from the full S-1 referenced above:

Business

RMAX is one of the world's leading franchisors of real estate brokerage services. The business strategy is to recruit and retain agents and sell franchises.

Franchisees operate under the RE/MAX brand name which has held the number one market share in the U.S. and Canada since 1999 as measured by total residential transaction sides completed by agents.

Accordingly, the company slogan is "Nobody sells more real estate than RE/MAX." The RE/MAX brand has the highest level of unaided brand awareness in real estate in the U.S. and Canada according to a 2013 survey by MMR Strategy Group, and the iconic red, white and blue RE/MAX hot air balloon is one of the most recognized real estate logos in the world.

History

RE/MAX was founded in 1973 by David and Gail Liniger with an innovative, entrepreneurial culture affording the agents and franchisees the flexibility to operate their businesses with great independence. This business strategy led to a 33-year period of uninterrupted growth, as RE/MAX added large numbers of franchises and agents in the U.S., Canada and around the world. Today, the RE/MAX brand operates in more countries than any other real estate brokerage brand in the world.

Competition

Competitors include Realogy Holdings (RLGY), which franchises the Coldwell Banker and Century 21 brands, among others, and Berkshire Hathaway Home Services, which acquired Prudential Real Estate and Relocation Services in 2012, and operates the brand Real Living, Keller Williams Realty, Inc. and Royal LePage.

Organizational structure

RMAX is a holding company with no material assets other than its ownership of common units of RMCO, and no independent means of generating revenue or cash flow and ability to pay. Dividends will be dependent upon the financial results and cash flows of RMCO and its subsidiaries and distributions received from RMCO.

See the organization chart here.

5% stockholders pre-IPO

Weston Presidio, 15%
RIHI, 85%

Dividend policy

RMAX intends to pay quarterly dividends of $0.0625 per share on all outstanding shares of Class A common stock, or 1.25% annual rate at the price range mid-point of $20. There are expected to be 10 million shares of Class A stock and 20 million shares of class B stock post-IPO.

Use of proceeds

RMAX expects to net $177 million from its IPO, or $205 million if the underwriters exercise their over allotment option.

$27.3 million is allocated to reacquire regional RE/MAX franchise rights in the Southwest and Central Atlantic regions of the U.S. through the acquisition of the business assets of HBN and Tails.

The balance is allocated to redeem stock.

Disclaimer: This RMAX IPO report is based on a reading and analysis of RMAX's S-1 filing, which can be found here, and a separate, independent analysis by IPOdesktop.com. There are no unattributed direct quotes in this article.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Source: IPO Preview: Re/Max Holdings