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First revenue dip in 5 years: Why PropertyGuru is going public in a US$1.8B SPAC deal

Singapore’s PropertyGuru has entered into an agreement with Bridgetown 2 Holdings, a special purpose acquisition company (SPAC) to go public on the New York Stock Exchange.

The deal will value the property tech firm at about US$1.8 billion, and is expected to close in the fourth quarter of this year or first quarter of next year.

The SPAC deal will provide the firm a much needed funding boost, and maybe a lifeline to extend the company’s growth ambitions. With the new funds, it will help the company to accelerate growth and pursue mergers and acquisitions (M&A) opportunities.

This announcement follows a net loss of S$11.8 million reported by PropertyGuru for the 12 months last year. The company also saw revenue drop 7.2 per cent from a year ago to S$82.1 million, according to filings from the Accounting and Corporate Regulatory Authority (ACRA).

This is the first time since 2017 that the company has seen a dip in revenue for its full-year figures.

This leads us to a bigger question: why is PropertyGuru making a loss in a year where the Singapore property market boomed?

To draw a similar reference, if we are to look at rival 99.co, it showed that the company reported a 66 per cent increase in revenue for last year instead at US$5.5 million, supported by high consumer interest in property.

Covid-19 may have dampened the spirits of many, but not for those in Singapore’s property market. Private home prices in Singapore rose for the fifth straight quarter for the second quarter this year. That equates to 15 months of bullish performance.

singapore property
Image Credit: EdgeProp

In the HDB resale market, prices climbed five per cent, as sales hit an eight-year high, partly due to pandemic-induced construction delays in the build-to-order HDB market, driving homeowners to look for other options.

We explore the reasons behind PropertyGuru’s reported weak financial numbers despite a property boom and how the SPAC deal can help propel its growth plans.

What does PropertyGuru do?

propertyguru
Screenshot from PropertyGuru

PropertyGuru is reported to be the market leader in Singapore’s online property listings industry. As of May last year, it claimed it holds a 75 per cent market share in Singapore. The company also has a presence in Malaysia, Thailand, Indonesia, and Vietnam.

On its website, the group said it offers 2.8 million available housing options monthly, has 37 million monthly property seekers, and 49,000 active property agents in Southeast Asia.

Its main source of revenue comes from the listing fees that agencies pay, and advertisement sales, primarily from project developers. There’s also a project research arm where analysts share about location and construction prospects to investors.

It has an awards platform that covers over 10 countries in Asia, where it organise events that developers attend to present their projects.

propertyguru
Image Credit: PropertyGuru

According to Google Analytics and PropertyGuru internal data, there was a strong year-on-year growth in total users from October last year to March this year, up by 58.3 per cent.

Page views also grew by 54.1 per cent from a year ago. The company offers an enhanced agent package to suit each agent’s career needs.

propertyguru
Image Credit: Property Guru

A standard listing costs around S$980 for 12 months, providing the agent tools like five concurrent listings and S$500 in ad credits.

Why is it losing money?

In the latest earnings filing to ACRA, it revealed that the online portal’s total liabilities exceeded total assets by S$42.9 million, compared to the S$39.4 million posted a year ago.

The firm’s S$82.1 million in revenue includes other income of S$2.8 million, of which around $1.8 million were from the Jobs Support Scheme (JSS), a government subsidy to support companies amid the pandemic.

The filing did not provide much details on the loss made for the year, but a look at its past media reports revealed active investment and M&A transactions, like a purchase on Malaysia’s MyProperty Data. The deal was made via a share purchase agreement.

ProperyGuru had said it would be investing substantially to expand MyProperty Data’s offerings and that also means growing the team with data scientists, engineers, product managers, sales and marketing experts.

propertyguru lens
PropertyGuru has been active in investment and M&A activities / Image Credit: PropertyGuru

It also launched new products like PropertyGuru Finance, a digital mortgage marketplace and brokerage that offers home financing services; and PropertyGuru Lens, a visual search feature that allows users to find property in the real world through their smartphone camera.

PropertyGuru had said that it will “accelerate its growth strategy across all key markets as the group ramps up its investment to meet the rapidly evolving needs in the property ecosystem.”

The company continues to be the market leader in Southeast Asia with a 57 per cent market share.

Another factor that could contribute to its weaker annual figures is the lack of conferences and events allowed in most countries to control the spread of the pandemic, and the firm’s awards platform could have been impacted by that.

Although it hosted its property awards via a digital expo, the virtual offerings may not have been as popular or as receptive as live events.

propertyguru asia virtual property expo
Screenshot from PropertyGuru

Making a quick reference to competitor 99.co, the rival actually implemented a cost-cutting program last year which resulted in around US$100,000 in savings.

It is clear that both companies are working on different strategies. 99.co’s employees, for instance, had taken voluntary pay cuts and opted for a pay swap version of the classified employee stock ownership plan while its CEO and co-founder Darius Chueng forwent his remuneration for roughly nine months.

PropertyGuru has been active in growing its capabilities even during the pandemic. It is not clear if it has made cost-cutting measures in this period, but in September last year it raised S$300 million in a funding round led by long-standing shareholders TPG and KKR.

SPAC deal to boost funding needs

To keep growing at this accelerated rate, PropertyGuru has to look for more funds to support its appetite, and that is probably one of the reasons why it has gone into a SPAC deal with Bridgetown 2 Holdings, the blank-check company backed by billionaires Richard Li and Peter Thiel.

It is said that both parties have been in talks for the deal since June. 

After the SPAC listing, PropertyGuru’s management team, led by CEO Hari V Krishnan, will continue to lead the public company. PropertyGuru’s shareholders, including KKR, TPG Capital and REA Group, will retain over 70 per cent ownership of the listed company.

propertyguru
Image Credit: PropertyGuru

PropertyGuru has been actively finding options to boost funding in the past few years. Other than the latest SPAC deal and the S$300 million raised last year, it had floated an initial public offering plan on the Australian stock exchange in 2019 that was eventually scrapped over valuation concerns.

The proptech firm is certainly not holding its horses in taking over Southeast Asia and wants to keeps its leading share. It said in the SPAC announcement that the funding will provide the company greater financial resources to “further accelerate organic growth and pursue M&A opportunities”.

It noted that Southeast Asia is estimated to become the fourth largest economy in the world by 2030, and there is “significant opportunities in the region’s property market as an increasingly affluent and digital-first population seeks property across the region”.

propertyguru
Image Credit: PropertyGuru

The investment in products and services are to stay ahead of the market’s evolving needs, which are increasingly being shaped by the growth of affluent and digitally-enabled populations living in cities across Southeast Asia, it added.

However, the company needs to watch its total liabilities while it continues to accumulate assets. If not careful, the topline might not perform up to expectations for 2021.

If PropertyGuru is a listed firm by then, it will have to answer to public investors who will decide whether if its profit model is a sound one.

This May, it agreed to buy up all of the shares in REA Group’s operating entities in Malaysia and Thailand, marking the biggest acquisition in its 14-year history.

The company claimed that the continued investments will enable it to emerge from the pandemic even stronger. It also expects its core offerings growth will allow it to enter into adjacent opportunities, such as developer operating systems and home services.


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Featured Image Credit: Medium, PropertyGuru

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