Interesting article on P 38 of this weekend's Australian...

Interesting article on P 38 of this weekend's Australian Financial Review about James Packer's investment in US property portal Zillow. He has paid $330 million for a 9.35% stake. The company was launched in 2005, is valued at $US3.86bn, but earned only a paltry $US5.9m in 2012. Revenue for 2013 is projected to be $US187m. The share price has tripled in the last 12 months.

This might give some background for the re-rating of IPP over the last couple of months. IPP is yet to be profitable, but based on the most recent press release, has had a pretty good July and may at last be cashflow positive for this current quarter.

It looks like the market may be using the Simon Baker (27 May, Property Portal Watch) method of property portal valuation, that is, as a multiple of revenue (discussed in previous posts and not something I am comfortable with). However, on this basis, IPP revenue is about 10% of Zillow, and although we are still missing the ever important ingredient of earnings, it looks like the market may be taking a position on property portals based on these sort of valuations. So you could draw a view that IPP may have a valuation of $US386m versus its current valuation of $AU236m.

So we will see if the market agrees over the next little while