ShrutiAggarwal
Member Since 8 December 2015
Offline
Last Seen: Mon 14:03
Posted on 4 February 2016, 4:18 PM

Right move Plc, A Hold with an upside of 5% to 10%

Topics: Analysis
Other Insights on Related Shares: RMV.L
Related Shares: Rightmove Share Price

Rightmove plc is a hold at the current price levels. Though based on the fundamental analysis and valuation we do not see an upside of more than 5 to 10% from the current levels, but any small correction or dip in its stock prices is a ‘Buy’ for the bulls. Based on the technical analysis the stock has been trading above its 50 day and 100 day moving average of 3973 pence and 3861 pence respectively. We see resistance at 4173 pence and once the stock breaks this resistance, it’s all set for a breakout and ready to make new highs. The company has been trading in a range between 2310 p- 4219 p over the past one year. Based on earnings estimates for the company's fiscal year ending in December 2015, the stock has a price-to-earnings ratio of 27.4 which is quite high compared to FTSE100 12 month forward P/E of 13.37. The stock has a trailing price to earnings of 38. Based on the analysis of forward P/E compared to FTSE 100 the stock seems slightly overpriced.  It finished trading on London stock exchange on Tuesday 2nd February at 4021 pence a share.

Rightmove plc is a United Kingdom-based company engaged in operating a property portal. The Company's principal business is the operation of the Website, rightmove.co.uk, which provides details of all properties available to buy or rent. Its platform provides an online property search. The Company's operational segments include Agency, New Homes and Other. The Agency segment provides resale and lettings property advertising services on www.rightmove.co.uk. The New Homes segment provides property advertising services to new home developers and housing associations on www.rightmove.co.uk. The Other segment consists of overseas and commercial property advertising services and non-property advertising services which include its third-party and consumer services, as well as data and valuation services. However, out of the three business segments, the company reports over 80% of the revenue from its agency segment. Rest 20% of the revenue is attributable to the other two segments. The company also continued reporting strong financial results throughout fiscal year 2015. As per the latest first half results of 2015, there is a 10% increase in UK residential property listings on rightmove since the start of the year 2015 to 1.1 m, which is 50% more than any portal. Also, the website traffic continued growing as the visits were up in H1’15 by 17% to 110m per month, compared to 94m in H1’2014. Also, Rightmove’s share of traffic to the top four UK property websites increased to 82% in H1’15 compared to 77% in June 2014. The website traffic continued increasing with a record number of people visiting and spending more time on the property portal. Rightmove PLC is the UK’s largest property portal and has a very strong brand recognition. The company also a has very strong financial matrix and is a debt free company. Also, the company continued pursuing its share buyback programme which also indicates that the company’s management too is confident of its business model.

As per the CEO of the company, “Rightmove is becoming even more popular with the British home moving public. Our share of traffic amongst the top four property websites has increased significantly as more people search and research the only place with over one million properties for sale and to rent in the UK”.

However, lately Barclay had raised its target price of Rightmove plc from 4200 pence to 4500 pence. Rightmove Plc has an average rating of Hold and a consensus price target of 3,804.81 pence.

Earnings outlook:

Based on the above discussion, the management guidance and our own estimates, we estimate Right move PLC’s 2015 revenue will be £183.7 million (£167 million for fiscal 2014) and the operating profit will be £136 million (2014 operating profit was £122 million). Our estimates are conservative and assume 10% year-over-year growth in sales and a margin for earnings before interest and taxes (EBIT) of 74%. In the past fiscal years also, operating profit margin on the topline has been in a range of 70%-73%. Please find below the earnings outlook of fiscal 2015:

 

Valuation:

From 2012 through 2014, Rightmove plc has traded at an average enterprise value by sales multiple of 19.0x. That assumes a multiple of 20.5x to calculate the target price. Based on this ratio and on estimated 2016 target price:

Source: Author’s own calculations

We set a ‘Hold’ recommendation on Rightmove Plc with a 6m-12m target price of 4239 pence.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Source: Author’s own calculations

 

Valuation:

From 2012 through 2014, Rightmove plc has traded at an average enterprise value by sales multiple of 19.0x. That assumes a multiple of 20.5x to calculate the target price. Based on this ratio and on estimated 2016 target price:

Source: Author’s own calculations

We set a ‘Hold’ recommendation on Rightmove Plc with a 6m-12m target price of 4239 pence.


Comments (0) Add Your Comment

No Comments yet, be the first!