Sign up Australia
Proactive Investors - Run By Investors For Investors

Rightmove downgraded; UBS recommends cashing in on merger mania

UBS likes the company but not the shares at this price and it does not think the imminent half-year results will change its mind
"A weak macro is negatively impacting house prices," UBS said

It's time to take profits on Rightmove PLC (LON:RMV), says UBS, after the recent strong run.

The shares received a lift when Silver Lake's bid for its smaller rival, ZPG, in the online property listings sector, and are now too dear, the Swiss bank reckons.

READ: ZPG posts 41% jump in first-half earnings, weeks after agreeing to a £2.2bn takeover​

Based on UBS's forecast earnings for 2019, the shares are trading on an earnings multiple of 27 and that is too high in UBS's view.

According to UBS's number crunching, that earnings multiple implies a 10-year revenue compound annualised growth rate of around 95% compared to the bank's own project of around 7%.

It's true, the consensus forecast for growth in 2018 is 9% but UBS thinks the consensus is too optimistic for four reasons.

Firstly, UBS reckons the UK property commission pool is expected to remain depressed; online agents have already cut commission rates.

Secondly, the digital revolution – Facebook et al - is shaking up the rental market, which currently accounts for around 20-25% of industry revenues.

Thirdly, UBS said there is “limited visibility into Rightmove's product pipeline”.

Finally, “pricing levers and market share gains” could be constrained following the takeover of ZPG, operator of the rival Zoopla site.

On the other hand, there is also the possibility of further sector mergers & acquisitions activity, but on balance, UBS thinks the current price of 5,124p is too good to resist, although it has increased its price target for Rightmove to 4,900p from 4,300p, based on discounted cash flow (DCF) analysis.

“Our DCF assumes Rightmove can grow revenues at a 7% over the next 10yrs, with flat EBITDA margins and a terminal growth of 2% in line with house price inflation,” the broker said.

Shares in Rightmove were down 1.8% following the downgrade but are still up more than 11% since private equity firm's


View full RMV profile View Profile

Rightmove PLC Timeline

February 12 2015

Related Articles

September 20 2018
“Cello Health is successfully building its early stage asset development advisory platform for biotech clients, as well as growing its core later stage and post-launch franchise with pharmaceutical clients”
Apollo 11
February 22 2018
Immersive VR, a technology company focused on the education space, was the first company Sure backed
Mobile users holding phones up
September 05 2018
The mobile advertiser is placing itself at the forefront of the digital revolution as companies and brands increasingly look to the web as the next forefront of advertising

No investment advice

The information on this Site is of a general nature only. It does not take your specific needs or circumstances into consideration, so you should look at your own financial position, objectives and requirements and seek financial advice before making any financial decisions. You acknowledge and understand that neither the Company, its related bodies corporate, the information providers or their affiliates will advise you personally about the nature, potential value or suitability of any particular security, portfolio of securities, transaction, investment strategy, or other matter. You should read our FSG and any other relevant disclosure documents and if necessary seek persona advice prior to making any investment decision.

You understand and agree that no Content (as defined below) published on the Site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable or advisable for any specific person.

You understand that in certain circumstances the Company, its related bodies corporate, the information providers or their affiliates may have received, or be entitled to receive, financial or other consideration in connection with promoting, and providing information about, certain entities on the Site and in communications otherwise provided to you.

You understand that price and other data is supplied by sources believed to be reliable, that the calculations herein are made using such data, and that neither such data nor such calculations are guaranteed by these sources, the Company, the information providers or any other person or entity, and may not be complete or accurate. From time to time, reference may be made in our marketing materials to prior articles and opinions we have published. These references may be selective, may reference only a portion of an article or recommendation, and are likely not to be current. As markets change continuously, previously published information and data may not be current and should not be relied upon.

Before you act on any general advice we provide, please consider whether it is appropriate for your personal circumstances.

© Proactive Investors 2018

Proactive Investors Australia PTY LTD ACN:132787654 ABN:19132787654.

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use