Purplebricks: U.K. Real Estate Play

| About: Purplebricks Group (PRPPF)

Summary

Purplebricks was IPO'd in 2015 and saw sales increase 159%.

The company is a holding of FPA International.

Purplebricks can save 50% to 70% over a traditional real estate agent.

Purplebricks Group (OTC:PRPPF) is a British online real estate firm. The stock IPO'd in December of 2015 and has done quite well. Sales have dramatically increased and the company has gone into Australia, too. I got the idea from reading FPA International's (MUTF:FPIVX) quarterly report.

The stock trades for £2.08, there are 244.4 million shares, and the market cap is £509 million ($632 million). It takes $1.24 to buy one pound. Earnings per share was a loss of one pence for the first half of 2017. Not bad for a start-up.

Revenues in the first half of 2017 grew 159% from the first half of 2016 to £7.2 million ($8.9 million) to £18.7 million ($23.2 million). Gross profit grew 154% to £10.4 million ($13 million).

According to the company's website, Purplebricks is the third largest real estate firm in Britain. It only takes 45 minutes to get a property online and it receives 1.2 million visits a week. It costs ¼ of what a traditional real estate agent charges. The company charges a flat rate of £849. The company also operates in Australia and recently launched in Queensland and Victoria. The Australian business is growing faster than the U.K.

The company calls its real estate agents "local property experts". These folks go through a training program. They are even granted stock options. The company has almost 350 as of December.

2017 guidance includes positive Ebitda, 380 local property experts hired, and 7.6 million options exercised. The stock has run from £1.07 at the end of November to a recent £2.08. Here's a good article from the Motley Fool in the U.K.

The company was founded just a couple of years ago by Michael and Kenny Bruce. It is backed by Neil Woodford and Errol Damelin, Two Brits with extensive tech investing knowledge. They think they can save the average home seller 50% to 70%. Their biggest competitors are Rightmove and Zoopla. Countrywide is the largest real estate firm in the U.K. Its stock got beaten up with Brexit. Countrywide launched an online portal too. I'm guessing they must be sweating bullets with Purplebricks ascendance.

Who doesn't like the idea of using an online service to sell a home? The fees real estate agents charge can be quite high. No doubt, these fees gobble up equity that home owners are trying to roll into new homes. I'm surprised it's taken this long for the idea to take off. Real estate agents have had a monopoly on housing transactions for a long time.

Is the stock a buy? Maybe. I'm not a tech guy but it reminds me of the stuff from the late nineties. If you could sell my house for a $1,200 commission, sign me up! I'm guessing FPA got in pretty low last year with Brexit concerns. I don't see much coverage on the stock in the U.S. so I thought I'd write this article.

Disclosure: I/we 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 (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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