Purplebricks has bought its entry into the Canadian market at a “steal” of a price.
Proptech analyst Mike DelPrete says he played a small but important part in the deal by which Purplebricks acquired DuProprio/ComFree for £29.3m.
DelPrete described the Canadian online firm as “one of the most successful real estate companies no one has ever heard of”.
It lists over 40,000 properties a year, generates over $40m in revenues and has over 20% market share in Quebec.
The acquisition means that from a revenue point of view, Canada immediately becomes Purplebricks’ second largest market after the UK.
DelPrete says that the UK contributes 67% of Purplebricks’ revenue, Canada 20%, Australia 11% and the US 2%.
He points out that Purplebricks has an ‘enterprise value’ of £978m. That works out to 10.4 times its revenues of £93.7m.
By contrast, it has paid £29.3m for DuProprio, which is just 1.3 times its revenues of £23m.
So why was DuProprio valued so low?
It was bought in 2015 by Canadian Yellow Pages for $50m, and sold for a profit of just $1m.
There is just one clue, says DelPrete – the company seems to need the money.
According to Canadian Yellow Pages CEO David Eckert: “As we continue to streamline and focus our operations, we believe the divestiture of [DuProprio/ComFree] is another very positive step for Yellow Pages and our stakeholders.
“Under the terms of our senior secured notes, the cash proceeds will be included in the next scheduled note redemption payment on November 30, 2018.”
With its Canadian purchase, Purplebricks will not have to spend anything like the money it has ploughed into the US and Australia.
In the US, over eight months, it has spent almost £18m to generate £2m revenue. In Australia over 20 months, it has spent £26m to achieve revenues of £17m.
By comparison Purplebricks has spent £29.3m in Canada for revenues of £23m – and it took just a day.