Don’t bet the house on it
With record low interest rates helping to focus investor attention on the property market, and James Packer directing some surplus cash into US online real estate investments, one little-known company that has received some renewed attention recently is Onthehouse Holdings Limited (OTH).
OTH is tiny: it has a market capitalisation of just $55m, but it has some interesting features. It has two separate businesses: a Real Estate Solutions Division – which provides services to real estate professionals and has traditionally been the main source of earnings – and a Consumer Division, which provides a range of online property information to home buyers, and is modelled on large overseas businesses like Trulia, Zoopla and Zillow, the latter of which has caught James Packer’s eye.
OTH is hoping that its ability to provide a wide range of information including property valuation and other data will allow it to make inroads against businesses like Realestate.com.au which currently dominate online classified advertising (and has a market capitalisation close to $5 billion).
Based on some internet traffic analytics we have looked at, OTH is making headway. At last count it had become the 235th most viewed website in Australia. This is well behind the leaders, of course, but OTH appears to be punching above its weight and improving.
At this stage we can see three distinct possibilities:
• OTH may continue its progress, and over time acquire a meaningful slice of the online real estate market;
• It may get swallowed by a larger competitor; or
• It may find itself hopelessly outgunned and sink without a trace.
That covers a wide range of outcomes in terms of possible investment returns. The thing that is appealing about OTH, however, is that there is a lot of positive asymmetry in the potential outcomes. Investors could lose 100 per cent of their investment if it goes bad, but could make many, many times that if it is successful.
Not one to bet the house on, but an interesting opportunity in the context of a diversified portfolio.
Tim joined Montgomery in July 2012 and is a senior member of the investment team. Prior to this, Tim was an Executive Director in the corporate advisory division of Gresham Partners, where he worked for 17 years. Tim focuses on quant investing and market-neutral strategies.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
