Google Finance
Filing
July 21, 2017
Q2 2017, Year end Sept. 30
Current Price: $9.12, Cap: $790m
1.Basic Information
(1) History
Real matters was found by Jason Smith at 2004. Till IPO at May 2017, the company has raised over $200m CAD. The company's main focus is on mortgage appraiser service. It is trying to use technology to bring more efficiency and improve quality of property appraising. At 2016, it entered title and close service market through acquisition.
(2) Business related:
90% of its business is from US and 10% from Canada. As it tied to mortgage market, the winter quarter Dec. 31 and Mar 31 generally has much lower revenue than the other 2 quarters.
Currently its appraisal business accounts around 5% of total U.S mortgage appraisal market. Title and close accounts only 0.6% of U.S total volume.
It is customer retention rate is real high at 95%. Its organic growth rate is at least 20%.
(3) Management.
Jason Smith is the key person. Since childhood, he worked for mortgage industry and found a mortgage related online company called Basis100 and it was sold at $33m at 2004. After that, he founded Real Matters at scratch and gradually grew it organically till now. He seems to be a very good sales person and a very capable manager.
Ryan Smith, Very likely is Jason's brother. He worked with Jason at basis100 and now he is CTO of Real matters.
(4) Debt and Credit facility.
Current debt is around $15m.
(5) Insider holding, options, Insider trading info, share buy back.
Altus Group Limited: 10.5m shares. 12%.
EdgePoint: 7.4m shares, 8.5%
AGF: 5.1m shares, 5.7%
Urbana: 3.1m shares, 3.6%.
Fiera: 1.3m shares, 1.4%.
Mosaic: 1.5m shares, 1.7%.
WhiteCap:
Wellington:
Total insider and major institutional holder(>0.5%) holds 76% of total shares and has been locked up for 180 days after IPO.
Currently there are 5.4m options outstanding.
(6) Employee numbers
(7) Industry comparison.
(8) Major events
On May 1, 2015, it acquired Southwest Financial Services for $27m. It seems generates $44m annual revenue at 2016.
2. Financial data.
2013: 85m.
3. Valuation
The company was FCF positive since 2011. Currently it makes very little or incurs small losses. It is hard to valuate from a profit basis.
On revenue side, it is expected to generate USD$350m revenue at 2017. And the growth rate is expected to be 20% to 25%. The company targeted by 2021, its appraisal market share grow to 15% to 20%, based on $2.5B market, it is $400m to $500m. By 2021, its title and close market share grow to 1% to 3%. Based on $13B markt, its $130m to $400m. In total, it is target $500m to $900m revenue by then. Using medium $700m, that is around $870m in CAD$. Adding another 10% Canada side, the revenue is close to $950m CAD$ by then.
Use 10% net income and 25P/E it might support $2.5B market cap by then. Current share count is around 86m, by then it might exceed 100m.
If based on current estimate USD$350m revenue for 2017, it is around CAD$420m. Current market cap $790m is less than 2 times of revenue.
4. Risk
(1) Mortgage market might slow down both US and Canada. However, its market share is small and it is quite disruptive. Overall I am not overall worried about this.
(2) Growth might be slower or even no growth.
(3) It might not be profitable for a while.
(4) It is a very new IPO and some older share holder might choose to exit once lockout time ends.
5. Conclusion
It is a very high growth and well managed company. It could be a good one if it can achieve the growth and profitability.
6.Links
