REA Group’s takeover of iProperty Group offers the property portal a chance to relive its stellar success in Australia all over again in South East Asia.
The deal, which values the target at $751 million, comes at a time when online still represents only between 2 per cent and 15 per cent of the total real estate advertising spend in iProperty’s markets.
Crucially, the transition to online is occurring at a rapid pace, with online growing at a whopping 40-to-50 per cent a year in the countries in which iProperty is the top property portal.
The real estate ad market in Hong Kong is worth $340m, in Malaysia comes in at $270m, in Indonesia and Singapore $200m and in Thailand $140m.
In total, the ad spend of all these regions is of a similar size to Australia’s real estate market, but the split between online and offline is markedly different.
“The transition from offline real estate advertising to online is at an earlier stage that in Australia but is accelerating and represents an enormous monetisation opportunity,” REA Group says in an investor presentation.
The real estate advertising budgets in iProperty’s markets are also similar to that of Australia, and growing faster, it notes.
The $4-per-share offer, which represents a 55 per cent premium to iProperty’s (IPP) share price before REA took a stake in the company in July, and is a 14 per cent premium to Friday’s close of $3.51, is based on a belief that expanding populations and increasing GDP per capita will continue to drive property transactions.
iProperty was listed on the local sharemarket in 2007 and has grown to become one of Asia’s leading network of property websites. REA currently holds a 22.67 per cent stake in iProperty, and Catcha Group, which holds a 16.7 per cent stake, says it will vote in favour of the deal.
REA Group, which also has platforms in Luxembourg, Germany, France and Hong Kong, as well as its realestate.com.au platform, is majority-owned by News Corp, publisher of Business Spectator. A year ago, News Corp and REA Group spent $US950m acquiring US online real estate platform, Move Inc.
Move is the third-largest digital real estate platform in the US. The number one player in the US, Zillow, spent $US2.5 billion acquiring number-two player Trulia.
As REA Group busies itself positioning to do it all over again in South East Asia, one Australian fund manager says local investors wanting exposure to mass digital migration should look from real estate to education.
Online education group 3P Learning’s flagship Mathletics program is the leading maths software used in Australia and UK schools, and is making deeper inroads into the UK and the USA, where current penetration is low relative to Australia.
The firm also has potential to charge more and reinvest in development to encourage further migration, and expand sales of other products such as IntoScience and Reading Eggs.
A note from Ophir Asset Management says it “compares the opportunity of 3P Learning to that of Realestate.com.au 10 years ago.”