Purplebricks Share Discussion Threads

[cyberduck] 13/2/2017 11:45

trytotakeiteasy, this is why people are investing. They do see fast and profitable growth. Hardman & Co predict 10% market share and suggest they're being conservative.

As for marketing costs - I think these will be less of an issue as word of mouth and the "for sale" signs start to do a lot of the work. They predict break-even this financial year.

Margins - I can't really see competitors spending the amount required on marketing and then trying to take market share from PB by having lower prices. They will be targeting the traditional estate agents share of the market which is currently about 95% of it with the average commission being about £4000.

I don't see much of a future for high street estate agents. 90% of properties are currently found via online portals.

Clearly PB need to tick boxes to maintain the current high share price and any bad news will hit the share price, especially as the share float is pretty small.

Not for the faint hearted but I think the forecasts are realistic and possibly even on the conservative side.

[trytotakeiteasy] 13/2/2017 10:53

Lets assume those market share figures are correct. It seems to me they are driven by outspending rivals on advertising to attract new customers. This relatively high marketing spend cannot continue forever. Let us say that the online segment becomes a large part of selling homes in Aus/UK. Consumers will become adept at choosing the best value online agent which will put pressure on margins.

The crux for me is that even if this is a high growth business it can't really be a high profit margin business. Looking at the last results for the six months to 31 October. Revenue at £18.7m and an EBITDA loss of £2.2m. However, the market value here is £524m. The risk/reward ratio here just looks insane to me i.e. assuming a very high probability of fast and profitable growth.

[cyberduck] 12/2/2017 11:49

I didn't say they would achieve a dominant position, I said they would share the market with other companies. The barrier to entry is of course the cost of advertising.

At some point the cost of entering and staying in the market compared to the potential return will not be worth it anymore which will limit the number of companies.

Local Experts are easily dispensed with if the public decide they are happy to list properties without them.

I understand from figures released by PB back in December that they have a market share of 63% of the online business. A broker report from September claims they had between 2% and 3% of the total property market.

[trytotakeiteasy] 10/2/2017 14:20

cyberduck - you are assuming that you need a "local expert" to sell a house. Not really sure why that is necessary at all. Also you are assuming that Purple Bricks gets a dominant share among online agents. This is highly unlikely with a host of companies in the space and few barriers to entry. With no network effects this area is unlikely to be highly concentrated. Just to name a few competitors: emoov, Tepilo, House simple, easyproperty etc etc. These firms are likely to continue to undercut Purplebricks on price.

So in my view the risk/reward just doesn't add up.

[cyberduck] 09/2/2017 19:51

There is certainly more problem competing with Rightmove than PB. The only thing you need to compete with PB is money and enough Local Property Experts. By moving first PB have the chance of getting the best local property experts on board. Their brand will be established and word of mouth and those "for sale" and "sold" signs will do much of the marketing work that is carried out by TV advertising.

Even if there are a couple of others who spend the money and are able to recruit enough experts there will become a point when there's no point joining the game. It will become more expensive and you are chasing a smaller percentage. PB and the other early movers will have a piece of the pie.

PB's target is 10% of the market both here and in Australia and the broker estimates are based on this. Hardman & Co suggest a valuation of £4 per share if the targets are met over the next 3 years.

I personally don't think it would be out of the question for PB to have 10% of the market here in the UK. Perhaps a couple of others with the same model will also have 10%.

Then there's the rest of the world.

Then others offering a cheaper option with no local expert should also have a share of the market. And there's no reason why PB won't offer that option if it looks like that's what customers want.

The ones looking like they are not going to have a share are traditional estate agents who charge £4000 on average per sale and those who don't have money to fund the business growth.

[trytotakeiteasy] 09/2/2017 18:05

salty - very different. Rightmove is the platform. Consumers go to Rightmove as the hosting companies with the most listings. So the more customers get the better Rightmove is for consumers and therefore the more customers it gets. Ideal network effects. For Purple Bricks there are no network effects for its customers or people who buy homes. It is just a company that will list an advert somewhere for you. The advertising platform is Rightmove with all the advantages that being the platform offers.

I looked at Purplebricks to sell my flat. Decided against it as they were too expensive and the main thing selling it is an ad on Rightmove. If emoov are half the price then why go with Purplebricks? There are no barriers to entry for a company paid to list ads. There are strong network effects and therefore barriers to entry for people who compete with Rightmove.

[saltaire111] 09/2/2017 12:10

Try - but it was exactly the same situation when Rightmove launched. There were loads of sites offering the same service but Rightmove outspent them and out performed in terms of technology and branding. Surely this is exactly what PB is doing?

Salty.

[runthejoules] 08/2/2017 19:33

trytotakeiteasy - I'm not invested in PURP (God I wish I was, how did I miss out on this one?) but yours is a very interesting take. However, being the premier brand can be a moat in itself - there are many cokes but only one Coca-cola. This one looks very toppy, and I hella wish I'd bought on the lettings charges dip, may buy on another one but will have a look at emoov as well...

[trytotakeiteasy] 07/2/2017 17:57

kcr69 - I don't really agree. Companies that do well offer a product at a price that competitors can't. Purplebricks is really just offering a hosting service with no barriers to entry. I could start up on competition tomorrow. All you are paying for is for them to list your property on Rightmove etc. No buyer really cares if it is on Purplebricks or emoov. Accordingly, Purplebricks have no defendable advantage. The only reason they are doing well now is that they have outspent everyone on marketing in order to get new instructions. That can't go on forever and is very costly. There are no network effects to keep Purplebricks at the top of the pecking order.

There are a host of companies offering a commodity product in this space and competing on price there is not scope for a company like Purplebricks to earn fat margins over the long-term.

In short, there is nothing unique or defendable about this business.

[kcr69] 06/2/2017 10:57

trytotakeiteasy

Your own experience is exactly one of the core reasons why Purplebricks will be hugely successful and a stunning investment. You didn't even mention a high street agent in that post. There is plenty of market share for both PB and emoov to grab, as both businesses are probably on average 75% cheaper than the high street for an 'average' property sale.

[trytotakeiteasy] 01/2/2017 16:28

I don't really like this stock but the latest TV ad is quite good. Bloke screaming into a cabinet.

One thing worth noting about the current valuation. It is essentially assuming that Purple Bricks will become a dominant player.... I can't see why should be the case given the plethora of competitors and the commodity like nature of the service...

I can only say that when looking to sell my flat online in London I went with emoov as it was a lot cheaper than Purple Bricks....

[croasdalelfc] 01/2/2017 09:19

I make it 64 listings in Australia in 2 weeks, 31 last week and 33 this week. Sydney has started, Perth hasn't .If my figures are correct and growth is maintained then I'm estimating 80-100 listings a week by end of March and revenue of £6m in May to Oct with the Aussie market at least 20% of group revenue.

[croasdalelfc] 31/1/2017 17:10

The first listings have appeared in Sydney - 2 for now.

[onjohn] 31/1/2017 09:43

New Land Reg Analysis for PCL: Transactions down 21%, prices up 4.5%.
Chelsea fares worst: prices fall 12.2%, sales 28.5%
Prime Central London (PCL) sales across the Royal Borough of Kensington and Chelsea and the City of Westminster, were down 21% to December compared with last year, according to London Central Portfolio’s (LCP) analysis of Land Registry and Lonres data
Over the same period, average sold prices increased 1.3% according to Lonres and 4.5%, according to LCP’s analysis of Land Registry’s most recent Price Paid data (to October 2016)
The Price Paid Data also demonstrates that the Inner Prime Central postcodes (below), have performed better than PCL as a whole, with transactions falling an average of 9%.
Prices in these areas increased 1.6%.
This suppressed price growth appears to be related to the new build sector. With new builds excluded, prices increased, on average, 5.0%.
According to the research, the lower value, up-and-coming areas saw the most robust levels of price growth, with Marylebone, Fitzrovia and Soho showing the highest increase at 19.7%
PCL’s more luxury areas, where prices average above £2m, on the other hand, typically suffered price falls. Chelsea was worst affected with price falls of -12.2% and a 28.5% fall in transactions.

[kmann] 30/1/2017 08:57

Rise due to short covering imo. With almost half a billion market cap, expect another bear raid when the fizz dies out imo.

[au24] 29/1/2017 19:16

That's always the worry.

[opodio] 27/1/2017 20:10

they didn't mention the imminent placing, oooops

[saltaire111] 27/1/2017 19:34

Statement appears to have taken the shine off somewhat.

[hillofwad] 27/1/2017 13:01

Lamparan Well yes who was suggesting that Bricks bying BelvoirIts the other way around -very easy deal for Bricks 1 principal shareholder at retiremnt age to knock on the head . Brickscould easily raise £35m with a placing at around 175p with momentum they have .This would kickstart the moribund letting side and leave a little in the piggy to advance the rollout in Oz

[lampran] 27/1/2017 11:43

Belvoir couldn't afford bricks, maybe only countrywide could. at a push perhaps connells - but it'd be expensive

[hillofwad] 26/1/2017 15:59

I think the rest of the property world has woken up .Spike today on the basis of a tweet by Bricks saying record January for instructions of course forgetting to mention it hasnt entirely picked up the dismal December of 1500. Lets face it the millions spent on the new TV campaign must have had some effect Still plenty of complaints and the proeprties will be hanging around the portals Lettings has failed completely which naturally they are very quiet about Bricks no doubt will b eusing this as a chance to raise some more money maybe £30m which should see them through the Oz rollout and / or buyout someone like Belvoir to up the ante

[ny boy] 26/1/2017 13:31

Breakout from 175p resistance, now turned support.

[saltaire111] 26/1/2017 13:28

The potential in this is unlimited, if they get it right and become the dominant player among their on-line peers. It has the potential to disupt Rightmove's model. of course there's a long way to go but the momentum is with Purp.

Salty

[ny boy] 26/1/2017 13:16

Strong breakout, not in these but hope you holders are still in these and enjoying the rise. Too hot for me, seen these stock spike and collapse, will keep it on my follow list though. Added Foxtons @ 93p for a decent uplift in Q2 onwards.

[saltaire111] 25/1/2017 17:48

Broke past previous high today. Delighted with the progress being made.

Salty