PropertyGuru the property listing platform is due to list in the US via a SPAC listing with the Richard Li and Peter Thiel backed Bridgetown 2 Holdings. Will they flourish or crash and burn like Grab? Let’s analyse their SPAC listing in this article.
PropertyGuru’s SPAC Merger Overview
Here is a brief overview of the indicative details from PropertyGuru’s SPAC listing with Bridgetown 2 Holdings:
- PropertyGuru SPAC Price: $10
- PropertyGuru to commence trading on 18 March 2022
- Combined SPAC market capitalisation based on initial capital: around $1.8 billion
- Initial capital: $431 million (before $38 million in fees)
- Update: Redemptions removed about $177.4 million from the transaction bringing total capital to $253.6 million
- Enterprise value based on initial capital is $1.35 billion implies a FY22 EV/Revenue of 12.4x
What is PropertyGuru?
Founded in 2007, PropertyGuru is a PropTech company and is Southeast Asia’s #1 digital property marketplace with leading positions in Singapore, Vietnam, Malaysia and Thailand.
It expanded from being a mere online property classifieds marketplace into a digital sales and marketing portal and a mortgage marketplace. With the data it collects from these three business models, it is able to also offer property market intelligence via its platform.
PropertyGuru currently records more than 3.3 million real estate listings a month and has seen user traffic of more than 52 million property seekers monthly. It also has more than 57,000 active real estate agents paying for access to its platform.
The company forecasts approximately $72.2 million in revenue for FY21 and has recorded positive adjusted EBITDA in FY19 & FY20.
PropertyGuru has forecasted a 29% CAGR up to year 2025 mainly due to its position in the Southeast Asian market. This is supported by macro tailwinds such as urbanisation, middle class expansion and digitalisation.
PropertyGuru plans to achieve its growth by growing its core services in existing markets and also expanding its offerings into Data Services, developer operating systems and post sales services to home owners (eg. contractor services and moving services). This will allow the company to expand its operations into adjacent markets and grow its total addressable market.
While its current key revenue drivers rely on its marketplace, it envisages to grow its FinTech segment which provides an existing brokerage service by entering into valuation and data consultancy services. It is also looking to provide enterprise software and other data solutions to its users which includes not only property agents but home buyers and other real estate professionals.
Key investors backing the PropertyGuru SPAC
PropertyGuru is expected to raise $432 million in gross proceeds from the transaction, which includes a $299 million cash infusion from Bridgetown 2 and $133 million from investors such as Baillie Gifford, Naya, REA Group, Akaris Global Partners.
Bridgetown 2 is backed by Peter Thiel who is an entrepreneur known for companies such as Paypal and Palantir and Richard Li, the son of Li-Ka Shing who is connected to companies such as PCCW and FWD Group.
Well known hedge funds such as KKR and TPG Group who are existing shareholders will also roll all their equity into the SPAC.
Transaction overview and valuation
Given that most SPACS have fallen significantly in recent times, with Grab falling more than 70% from its listing price, the two biggest questions on most investor’s minds has to be:
Why list now and why through a SPAC?
PropertyGuru has provided four reasons:
1) Access to capital market
The sizeable proceeds from the SPAC listing will be used to finance new acquisitions so as to expand its fintech business and venture into home services. The company has a strong record of carrying out acquisitions as part of its core strategy and expects to continue to do so.
2) Partnership
The slate of investors listed above are brand names which includes strong hedge funds and also experienced entrepreneurs.
3) US listing
PropertyGuru believes it can maximise its investor exposure with a US listing as it is the largest tech exchange. In addition, while SPACs have steadily been attracting interest in Asia, it is still in the nascent stage with Singapore having listed only three SPACs thus far and Hong Kong approving the listing of its first SPAC only recently.
On the other hand, the US has hundreds of SPACs which had helped hundreds of companies successfully debut in the US.
4) Right timing for listing
PropertyGuru has a recent track record of growth and profitability (on an adjusted EBITDA basis) and has seen transformation during COVID-19 due to its successful offline to online migration. It was able to drive digitisation and market share growth and believe itself to be well positioned to monetise in the post-Covid period with markets poised for recovery.
Is PropertyGuru fairly priced?
| Company | EV/Fwd Revenue |
|---|---|
| PropertyGuru | 12.4 x |
| Zillow | 2.2 x |
| Redfin | 1.1 x |
| Opendoor | 0.5 x |
| KE Holdings | 0.2 x |
While not directly comparable due to the difference in geographical exposure and forecasted growth rate, it is quite clear that PropertyGuru currently has a valuation that is many times higher than its next nearest comparable listed on the US.
Bridgetown 2’s share price took a plunge from the SPAC price of $10 as the merger firmed up, this could indicate that the market views the company as overvalued when compared to the broader market.
PropertyGuru SPAC: Good buy or goodbye?
PropertyGuru is a market leader in the fast growing Southeast Asia region. It is supported by multiple tailwinds and has also provided clear plans for its growth. The company has provided reasons for the SPAC listing at this point in time and is also backed by brand name investors which has provided the company with nearly $400 million in capital for the company to grow.
Similar to other SPACs, there is a strong alignment of interests between the existing investors and minority shareholders due to the significant stake in the SPAC. However, the biggest risk is the current market sentiments surrounding SPACS and when comparing PropertyGuru’s valuation to its peers and even to other tech companies with similar growth rates.
If you prefer to invest in properties rather than PropertyGuru, join Jeff at his next webinar to learn how he has built a portfolio of 14+ properties in the past decade.
