Singapore's PropertyGuru may consider future Asia listing after going public in New York as it aims to be 'gateway' to region's real estate
PropertyGuru Group, the Singapore-based property technology company that agreed to be taken over last week by Richard Li Tzar-kai’s special public acquisition company (SPAC), may consider an Asian listing in the future after it goes public in New York.
The company sees additional “upside” to further expand its dominant position in its core markets in Southeast Asia as it seeks to become the go-to portal for real estate in the fast-growing region as it prepares for a listing on the New York Stock Exchange (NYSE) as soon as the fourth quarter, according to its top executive.
A secondary listing closer to home in Asia is one option on the table in the future, but going public in New York at this time was the best path to achieve its goals, said Hari Krishnan, the company’s CEO. The company previously shelved an initial public offering in Australia two years ago, citing the uncertainty of the market at the time.
“The US is not just the deepest capital pool, but, frankly, the most mature investors when it comes to technology businesses,” Krishnan told the Post . “The question became where would people be able to know what good looks like and what great looks like.
''We see ourselves as a very good technology business with the potential to be a great technology business. Putting ourselves in that investor pool, in that consideration set, in that ecosystem, I think facilitates a realisation of our vision.”
The company, which counts private equity firms TPG Capital and Kohlberg Kravis and Roberts (KKR) as investors, sees a potential US$8.1 billion (S$11 billion) revenue opportunity in the five markets where it operates and is “barely scratching the surface” in some areas, such as home services, which include movers and contractors, Krishnan said.
“We want to be the gateway to access southeast Asian real estate,” Krishnan said. “We see our ability to drive what we call a property trust platform for Southeast Asia. That’s what we’re trying to do – drive more transparency, drive more efficiency through the marketplace and through software. As a result of that, [we can] create more trust between the stakeholders in the property system. If you do that, you build a very valuable platform business.”
PropertyGuru agreed last week to be acquired by a SPAC backed by Li and billionaire technology investor Peter Thiel in a deal that valued the company at US$1.8 billion . Li, a billionaire himself, is the younger son of property tycoon Li Ka-shing, one of Hong Kong’s most recognisable businessmen.
The deal to be acquired by Bridgetown 2 Holdings is expected to close in the fourth quarter or next year’s first quarter.
As part of the transaction, Bridgetown secured an additional U$100 million in private investments in public entity (PIPE) financing, anchored by Baillie Gifford, Naya, Australia’s REA Group and Akaris Global Partners. REA also agreed to an additional US$32 million equity investment.
SPACs have been one of the hottest fundraising trends of the past few years, with more than US$115 billion raised since the start of this year. The blank-cheque companies have no existing business and exist solely to raise money to buy companies they later take public.
PropertyGuru had been exploring the public markets, but ultimately settled on a SPAC because of the sponsors behind it and its operating team, rather than the structure of the vehicle, Krishnan said.
“Did they value us? Was there a meeting of the minds? Did they prescribe to our vision of the future for proptech in Southeast Asia? The answer to all of that was, ‘Yes’,” Krishnan said. “We also felt their ability to access unique investors in North America, as well as in Hong Kong in particular, were pretty good.”
Founded in 2007, PropertyGuru attracts more than 2.8 million real estate listings a month and garners visits from more than 37 million property seekers each month in Singapore, Vietnam, Malaysia, Thailand and Indonesia. It holds the number one position in four of those markets, as well as the number two position in Indonesia.
In addition to its online real estate portals, the company offers sales process automation software to property developers, known as FastKey. It is building what it hopes will eventually be a stand-alone property data provider similar to CoreLogic in the US and has started a mortgage marketplace where it acts as a broker in Singapore.
Southeast Asian markets are about a decade behind developed markets, such as Australia and the United Kingdom, in the migration of real estate offerings to online venues and are expected to experience significant growth, according to PropertyGuru.
The company remains unprofitable, reporting net losses of U$10.9 million in 2020 and US$29 million in 2019.
However, PropertyGuru has been positive on an earnings before income tax, depreciation and amortisation (Ebitda) basis for the past two years despite the economic slowdown caused by the coronavirus pandemic last year. The company is projecting an adjusted Ebitda of US$73.1 million, with a 33 per cent margin, in 2025.
“We take it very seriously that we want to increase our profitability over time and we’ve been able to do so,” Krishnan said. “From a net profit perspective, we are still loss making. We saw a declining net loss in [calendar year 2020] CY20. This is very much a Covid-impacted year for us.”
The company reported revenue of US$61.9 million in 2020, a 7 per cent decline from US$66.6 million in the prior year.
One challenge for the company’s expansion plans is the ongoing pandemic, with 2021 being viewed as a “Covid recovery” year.
For example, the company is forecasting 22 per cent year-on-year revenue growth to US$75.7 million this year, compared with revenue growth projections of 44 per cent in 2022 and 30 per cent in 2023.
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“Covid remains one of our top risk factors,” Krishnan said. “There’s no two ways about it.”
PropertyGuru plans to use proceeds from the transaction to increase its organic growth and pursue “smart, surgical” acquisitions. Ahead of the Bridgetown merger, the company agreed to acquire MyProperty Data in Malaysia in November and REA’s businesses in Malaysia and Thailand in May and could pursue more acquisitions in the near term.
Krishnan said the company’s “first and foremost” priority will be to digest its latest acquisitions – the REA deal is expected to close next month. In the near term, the company would probably focus on fintech, data and software, but could pursue acquisitions down the road in home services, Krishnan said.
The long-term total addressable market for home services – an area where PropertyGuru does not have an appreciable presence – is about US$2.7 billion, according to the company’s investor presentation.
“We would prefer to be in our five markets, go deep into the real estate ecosystem,” Krishnan said. “We really want to drive that digital transformation [in the region].”
This article was first published in South China Morning Post.
