Trade Me (TME)

[winner69]

All the IPO excitment seems to have been shortlived ... bit ho hum was it

See Stubbs (the Tower guru) writes about them in the NBR today .... reckons they are worth $4.66
Surely one of the best punts on the NZX at the moment .... come on you guys get that share price moving .... upwards .... needs a bit of +ve momentum ..... so come on get a move on .... open up those wallets .... get onto your broker today

[Silverlight]

$4.66, do you have a link? That must be on incredible growth forecast!

Current forecast for $65m profit full year or 13 cents EPS, give a 18 P/E, while they pay out 80% of cash so do RBD, HLG, BGR, WHS etc, and all trade on much lower multiples.

If TME grow profit at 10 -15% a year, in 2 years forcast will be $85m profit or 21 cents EPS, even in 2 years with that growth at $4.66 is a 22+ PE, and yield would be 3.5%. While I see TME do currently have a monopolistic structure given their subscriber base, there are little barriers to entry, and 22+ PE compares to AIA which is a true monopoly.

As a user, I don't sell on Trade Me any more, I do buy some things, but the fees are almost becoming destructive, they are nearing the peak of their growth cycle in their core business, and unless they do something radical (unlikely with Fairfax in a bad shape and needing the cash payouts), I can't see the growth in revenue that would drive a price that high.

Not a holder, but am happy to be surprised

[CJ]

For Barriers to entry, look at Sella.co.nz which I think is owned by APN. there fees are a lot lower (if not $0) yet they cant build market share. The biggest barrier to entry is the customer base.

I took part in the IPO but reassessed over xmas and decided that as a tech play, DIL was the best option on the market. TME is limited growth compared to DIL. I keep an eye on XRO but the hype is already built into the share price so the growth potential isn't as great.

[winner69]

$4.66, do you have a link? That must be on incredible growth forecast!

Need to go the shop and spend $9.90 to buy it (what a price eh)

I think the gist of Stubbs thesis that if TME was valued relative to realestate.com, seek.com and carsales.com (all listed on the ASX) on a country size basis those components could have an EV of $1.2 to which he added the current TME EV to come up with the $4.66

Suppose saying that the sum of the parts (or the potential of selling cars, finding jobs, and property listings) is not really being seen as any value by the (stupid) NZ investor

Go buy the paper and keep them rich anyway

[winner69]

Reread Stubbs little piece .... the key point means that the real estate, cars and jobs section of Trade Me have the potential to drive substantial advertising revenues ..... and if they (individually) were as good as Real Estate.com, Seek, and Carsales.com and valued accordingly the EV of Trade Me could be close to $2 billion ... shareprice of $4.66

Good stuff eh .... and who are we to argue with gurus like Stubbs

[CJ]

Winner - Trademe is already the market leader in realestate, jobs, vehicles. Therefore the revenues from those areas are already built in to the current figures surely.

The value can only go up if the increase members (already #1), increase fees (already people complain but luckily they cant leave as they are #1), or add an extra area (unlisted shares market like Secondmarket in the US, or maybe try to take over from the NZX with milk powder???).

Otherwise, it will just be the cashcow they are already.

[winner69]

CJ thats how I saw it as well .... would agree with Mr Stubb's methodology if the cars, jobs and properties were separate sites without being 'sections' of the same site

However who are we to argue with a guru like Stubbs .... no doubt he will make all the people invested in the Tower Funds very rich

[_Michael]

CJ thats how I saw it as well .... would agree with Mr Stubb's methodology if the cars, jobs and properties were separate sites without being 'sections' of the same site

However who are we to argue with a guru like Stubbs .... no doubt he will make all the people invested in the Tower Funds very rich

I am the only one stunned at how little sense Stubb's valuation of TME makes.

The biggest problem being that he compares the enterprise value of SEK and adjusts on population value to NZ.

Many problems with this:

1> SEK has 80% market share in Australia and 50% market share in NZ (already!) and 80% market share across about 10 other fast growing internationalmarkets

2> SEK enterprise value reflects all of the above so to extrapolate that on a "population adjustment" is very incorrect and misleading

3> All the other businesses have different cost structures, scale benefits etc so comparing earnings would be more relevant that E/V

The only thing I learned from Sam Stubb's valuation method was that it is time for me to switch my Kiwisaver away from Tower! If this kind of over simplified misleading thinking is running the investment business then I do not want my retirement savings there.

Not saying that TME is not a great business. It has great free cash flow and market position but the method which he creates $4.66 share price is just so incorrect and irrelevant that I am amazed it made print.

M

[_Michael]

I am the only one stunned at how little sense Stubb's valuation of TME makes.

The biggest problem being that he compares the enterprise value of SEK and adjusts on population value to NZ.

Many problems with this:

1> SEK has 80% market share in Australia and 50% market share in NZ (already!) and 80% market share across about 10 other fast growing internationalmarkets

2> SEK enterprise value reflects all of the above so to extrapolate that on a "population adjustment" is very incorrect and misleading

3> All the other businesses have different cost structures, scale benefits etc so comparing earnings would be more relevant that E/V

The only thing I learned from Sam Stubb's valuation method was that it is time for me to switch my Kiwisaver away from Tower! If this kind of over simplified misleading thinking is running the investment business then I do not want my retirement savings there.

Not saying that TME is not a great business. It has great free cash flow and market position but the method which he creates $4.66 share price is just so incorrect and irrelevant that I am amazed it made print.

M

Further to the point about SEK comparison. SEK E/V is based on them already having 50% market share in NZ and so that is getting priced in twice. TME has less than 50% market share for jobs in NZ and there is also no adjustment to compare to the 80% SEK has in Australia.

It is kind of ridiculous.

[winner69]

Michael .... but thats how the minds of these people work ... fundamental analysis at its best eh .... ha ha

But who are to argue with Stubbs .... the well respected and highly thought of CEO of Tower Investments ... a leading illuminary of the NZ savings and investment scene ... an ex Goldmans guy ... and an analyst guru supremo

It does make you wonder eh

Of course you can argue in a way .... take your money eslewhere