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magazinePurplebricks on the march
Purplebricks (PURP:AIM) 146.4p
Gain to date: 9%
Original entry point: Buy at 134.31p, 22 September 2016
Our positive call on online hybrid estate agent Purplebricks (PURP:AIM) is back in the money.
A very strong set of first half results (5 Dec) helped to repair the share price damage caused by a Government ban on upfront letting fees in the Autumn Statement (23 Nov).
Purplebricks posted revenue up 159% to £18.7m in the six months to 31 October. First half instructions are up 108% year-on-year.
The group as a whole, including a recently launched operation in Australia, posted a £2.2m loss at the adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) level but a modest £300,000 profit on the same measure in the UK.
Purplebricks operates a hybrid model with a website backed by a growing number of local property experts who earn a commission for each new instruction they win.
For the company to be successful in the long-term it needs to demonstrate it can actually sell houses. Otherwise homeowners will grow disillusioned with the product and stop using it.
The company is increasing marketing spend to capture market share at a time when its traditional bricks and mortar rivals like Countrywide (CWD) and Foxtons (FOXT) are struggling. It says this will have some impact on profitability in the near-term.
We still rate the shares as a ‘buy’. Investec has a price target of 185p.
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