Brokers hail property portal’s better-than-expected financial

Property portal OnTheMarket PLC (AIM:OTMP) delivered a good news update on Friday, telling investors its earnings for the year would be ahead of market expectations.

It primed the City to expect the business to post adjusted operating profit of at least £2.5mln. That compared to a consensus figure of around £2.1mln for the 12 months ended January 31.

OTMP maintained its upbeat assessment of prospects and said it would update on the outlook next month.

“We are pleased to note this morning’s confirmation that OnTheMarket has continued to enjoy positive trading and operational momentum,” said Shore Capital, the company’s joint broker, in a note to clients.

“More broadly, we continue to view it as a well-managed, financially robust business offering an increasingly compelling and comprehensive range of services to agents and home hunters.

“We would also cite its commitment to innovation (including the addition of a range of promising strategic partnerships), ability to offer equity to agents, and the opportunity to build on a promising foundation in the new homes market as key positives.”

Shore pointed out that OnTheMarket trades at a 50% discount to larger rival Rightmove PLC (LSE:RMV), but is set to deliver superior earnings ‘progression’ than the FTSE 100 property website.

Zeus Capital, also a broker to the company, provided some interesting analysis of its current valuation versus where it could be.

It pointed out that at the current price of 119p (with 13p of the accounted for in cash), OnTheMarket is trading at an enterprise value to sales multiple of 2.8-times.

“Investors confident OTMP will operate to the ‘rule of 40’, should expect OTMP to trade on over six-times sales (i.e. around 226p a share,” Zeus said in a note to clients.

The ‘rule of 40’ says that a software company’s revenue growth rate and profit margin combined should add up to 40 or more.