What’s new
Onthemarket Plc (LON:OTMP), the Court of Appeal issued judgment in favour of OTM’s wholly-owned subsidiary Agents’ Mutual Ltd with regard to all the competition issues in its proceedings against Gascoigne Halman.
The judgments of the Court of Appeal and the Competition Appeal Tribunal (CAT) in July 2017 support the view that OTM’s strategy has been pro-competitive.
Ian Springett, OTM’s CEO, commented: “We welcome the Court of Appeal’s unanimous judgment in dismissing Gascoigne Halman’s appeal. It upholds the Competition Appeal Tribunal’s unanimous judgment handed down in July 2017, which found in favour of Agents’ Mutual and against Gascoigne Halman on all competition issues.”
Zeus view
We expected the Court of Appeal to find in OTM’s favour. It is helpful that the judgment was unanimous. We see this judgement as a step towards resolution.
Competition Law is vitally important, particularly when businesses provide vital services, where there are dominant suppliers and where there are known issues. The CMA is alert to potential issues in the UK Property Portal market. The judgements in the CAT and in the Appeal Court support our view that OTM has acted properly in building a market-leading agent-backed alternative to Rightmove and Zoopla. OTM provides “a first-class service to agents at sustainably fair prices”.
Evidence of the quality of OTM’s service is provided by testimonials from 37 agents (see pages 4 to 10). We summarise key points on page 3.
Valuation: Equity value/office.
In our opinion equity market value per office is a useful indicator. At 81p a share OTM has over 12,000 offices and is trading on an equity market cap of £50m (i.e. only £4k/office; Rightmove is trading on £232k/office), which does not reflect the value of these relationships which we estimate to be more than £20k/office.
The allocation of over 35m shares to agents should secure long-term agreements with high quality agents.
By 2020-21, with the portal delivering an EBIT margin of over 30%, we would expect onthemarket to trade on over £20k/office, which would be consistent with a fully diluted share price of over 300p a share.
