iProperty’s widening loss: A deeper look into the business: Page 2 of 2

Indonesian market leadership maintained

In Indonesia, iProperty in an email reply claimed that it has the biggest property portal network with over one million unique visitors a month (as of June 2014). In contrast, in October 2012, it had 900,433 unique visitors.
 
Revenue in Indonesia is also growing strongly, the company said. During the first half of this year, it registered a revenue of A$716,196, a 45% jump versus the A$491,784 recorded in the first half of last year, according to its filings with ASX.
 
In terms of earnings however, the Indonesian operation is among the group’s worst performer. For the first half ended June 30, 2014, it registered an operational loss of A$1.17 million, versus an A$1.10 million loss in the first half of 2013.
 
In 2013, its revenue in the country rose by 29%. This was backed by a 42% increase in registered paying agents to almost 8,000, a 78% growth in listings to almost 240,000, and with unique visitors also peaking at over 1.2 million per month.
 
“All of these results validated our decision to double our marketing spend during the year, including a campaign to give away a free house, which generated awareness and excitement,” said the company in its 2013 annual report.
 
Although the jump in revenue is encouraging, it is certain that its business in Indonesia – a country with a population of over 237 million, and with a rising middle-income group – has yet to reach its full potential.
 
Singapore losing its shine?
 
While Indonesia experienced an increase in its topline and a decrease in its bottomline, iProperty’s Singapore business is facing an inverted scenario: An improvement in the bottomline, but a dip in the topline.
 
For the first half of 2014, the Singapore business was worth A$1.15 million, a decline of 21% compared with the A$1.47 million recorded in the first half of 2013.
 
During the same period, iProperty’s Singapore operations recorded an operational loss of A$570,466, a big improvement compared with the A$973,470 loss it registered for the first half of 2013.
 
Behind the underlying performance lies a major concern: That is, iProperty may be losing its attractiveness to Singapore home buyers and real estate agents.
 
For a few years when iProperty first went public, it was able to grab the pole position in the property portal market.
 
In fact, in its filing to ASX for the first half ended June 30, 2011, it claimed that iProperty Singapore had achieved market leadership in terms of number of visitors, as opposed to the current situation, where it is No 139 versus PropertyGuru’s 22nd ranking.
 
It is hard to pinpoint when exactly iProperty lost its market leadership, as this can be measured via various matrices, but it is believed that the change may have happened sometime around 2010 or 2011.
 
Nevertheless, one thing is certain – competition in this space is fierce in Singapore.
 
In the company’s 2013 annual report, its chairman Patrick Grove – also the founder and group chief executive officer of Catcha Group – highlighted that iProperty.com.sg was operating in a challenging environment, with three property portals battling for market share in a country with a population of just over five million people.
 
“In addition, continued government property cooling measures led to subdued market conditions,” Grove (pic) said in the annual report.
 
Despite the challenging environment, there are no signs that the company is giving up on the market – after all, Singapore is one of the world’s biggest real estate markets.
 
According to a PwC report, as of the first half of 2013, Singapore was ranked No 9 globally with real estate sales volume of US$4.71 billion. This makes the city-state the largest real estate market in South-East Asia, and the third largest in Asia behind Tokyo and Hong Kong.
 
“The company is repositioning Singapore as the entry point to the Asia region for international and national developers and agents,” Chmiel told DNA.
 
Analysts feel that the battle for the leadership position is not over.
 
“I have seen many market leaders became market laggards, and within a few or several years, they reversed their fate and became No 1 again. So, don’t be surprised if iProperty.com.sg reclaims its leadership position one day,” said an analyst from a local brokerage.
 
Spring cleaning?
 
Some industry observers also raised the question of whether the impairment exercise has anything to do with REA Group’s investment into the iProperty Group.
 
On July 28, Catcha Group inked a deal with REA Group, an affiliate of media tycoon Rupert Murdoch’s News Corp, which saw REA Group acquiring a 17.22% stake in iProperty for A$106.3 million in cash.

When asked about this, iProperty’s Chmiel said that the impairment tests are done on a half yearly or yearly basis, or when there are significant indications that assets are being impaired.
 
Under the Australian Accounting Standards Board’s rule for the impairment of assets, a company can perform an impairment test at any time during an annual period, provided it is performed at the same time every year.
 
In iProperty’s case, the 2013 first half and full year results revealed that it had performed the impairment test at least twice last year.
 
“The impairment test is completely unrelated to the REA investment,” said Chmiel, adding that the investment was a sign of the REA Group’s confidence in iProperty’s long-term growth prospects.
 
“It confirms our strategy; it confirms our market position; it provides business opportunities; it is the biggest transaction of its kind in Asean.
 
“iProperty is the clear market leader in the (South-East Asia and Hong Kong/ Macau) region. The combined group (of REA and iProperty) is the largest online real estate portal company in the world,” he claimed.
 
Related Stories:
 
Catcha’s iProperty gets US$100mil funding from News Corp company (Updated)
 
iProperty market cap crosses RM1bil mark
 
PropertyGuru: Yesterday Singapore, today SEA, tomorrow … ?
 
 
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