Valuation doubts behind PropGuru's weak demand

Lack of investors, including strategic ones, said to have led to Aussie IPO pullout


PROPERTYGURU'S choice of Australia as a listing venue that holds more promise than its home bourse in Singapore has turned out to be not so hot after all.

The South-east Asian real estate portal on Wednesday abandoned its proposed flotation on the Australia Securities Exchange (ASX), citing uncertainty in the initial public offering (IPO) market. The company said it decided not to proceed with the IPO despite "strong investor support" from a number of global and Australian investors.

The property technology firm lodged its IPO prospectus two weeks ago with an indicative price range of A$3.70 to A$4.50 per share. The top end of the range would have raised A$380.2 million (S$354.7 million).

On Tuesday, Reuters reported that investor interest had come in at the lower end of the range. A book message sent on Tuesday by joint lead managers UBS and Credit Suisse also stated that institutional demand was oversubscribed. The retail tranche closed on Tuesday. Trading was due to start on Friday if the bookbuild was successful.

People familiar with the deal told The Business Times (BT) on Wednesday that the order book could not be filled even at the bottom end of the price range. The move to scrap the IPO was thus unsurprising, especially with no strategic investors coming in yet, they added.

The listing would have led to a market cap of A$1.16 billion to A$1.36 billion, valuations that some industry sources said was too high for a business that's still in the red despite being a regional market leader.

A possible comparison might be drawn with Singapore property listings startup, which announced - one day after PropGuru's prospectus was lodged - that it will take over ASX-listed REA Group's in Singapore and in Indonesia via a joint venture (JV). REA will hold a 27 per cent stake and inject US$8 million in working capital to the JV.

"They didn't disclose the valuation of or the JV, but this deal gives an indication of a more market-realistic valuation of the real estate listings business," an industry source said. In August, had said it was valued at over S$100 million after a S$15.2 million Series B round.

PropertyGuru's prospectus states it has an average 60 per cent of its five South-east Asian core markets. iProperty, also a leading portal in the region, was valued at A$750 million in 2015 after REA acquired its remaining shares, although REA later announced an A$180 million impairment against iProperty in 2017.

The company had said it chose to list in Australia because of the presence of Domain and REA. The two have market values of A$1.9 billion and A$14.4 billion respectively.

Its cancelled float follows a recent trend in Australia's IPO market. Two other deals - consumer lender Latitude Financial as well as oil and gas construction firm MPC Kinetic - also failed in the past fortnight after they fell short on investors. In September, GFG Alliance also halted the listing of parts of its Australian Liberty Steel unit. New IPOs in Australia raised a skimpy US$416 million in the first nine months of 2019 - the lowest amount for the period since 2012.

Sources say Australian investors may not have much appetite for foreign firms, particularly those from South-east Asia.

Domestic firms made up a hefty 96.7 per cent of ASX's market cap in September. Of the foreign entities, most are from New Zealand, according to Bloomberg data.

In contrast, overseas entities made up some 43 per cent of market cap on the Singapore Exchange as of September, with the bulk originating from Greater China and South-east Asia.

On Wednesday, PropGuru said it does not require new fund-raising to fund its current business operations.

It also pointed out that both major shareholders - TPG Capital and KKR which together hold over 50 per cent of PropGuru - were not looking to sell any shares in the IPO and had entered into voluntary escrow arrangements until February 2021.

PropGuru chairman Olivier Lim said: "Should the company seek new funds to support our identified growth opportunities, we have a committed existing shareholder base and access to private capital markets."

Part of the listing proceeds was to fund the company's growth strategy, which includes developing data offerings and creating an online mortgage marketplace. Other monetisation opportunities include refinancing, transaction, insurance and home services, including connections and repair.

Based on the prospectus filing, if the IPO had gone through, 30.1 per cent to 32.2 per cent of the firm would be held by new investors plus existing investors who are not subject to voluntary escrow deeds.

TPG and KKR's holdings would be diluted after the IPO. Based on the midpoint of the price range, TPG's stake would shift from 30.4 per cent to 26 per cent, while KKR's would move from 27.25 per cent to 23.3 per cent. Indonesian media firm Emtek was to sell down some shares in the IPO, cutting its holding from 15.5 per cent to 7.33 per cent.

PropGuru runs digital property classifieds marketplaces in Singapore, Vietnam, Malaysia, Thailand and Indonesia. Market watchers had told BT that it needs to find a way to monetise its data, beyond relying on advertising revenue. The industry sources said data could be harnessed and customised into value-added services and regular, customised reports for consumers.

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