Singapore-based PropertyGuru is set to complete its listing on the New York Stock Exchange next month despite widening net losses, with the online marketplace operator planning to use the proceeds of the share sale to expand its fintech business and venture into home services.
In an interview with Mingtiandi, PropertyGuru chief executive Hari V Krishnan said the company’s listing date will be determined within days of an extraordinary general meeting on 15 March where shareholders of Bridgetown 2 Holdings, a special purpose acquisition company (SPAC) backed by billionaires Richard Li and Peter Thiel, are set to vote on the proposed $1.8-billion deal.
“In Southeast Asia, there’s three mega trends: you have urbanization, you have digitalization and the emergence of the middle class,” he said. “The fact that 50 million people are going to move to cities and towns in our five markets and they’re going to look to buy homes, look for digital solutions because they’re digital natives means that we are well positioned, we are a clear market leader in our priority markets.”
The start-up, which is backed by US private equity giants KKR and TPG, remains optimistic regarding its SPAC plans more than two years after its attempt to go public in Australia failed due to “market uncertainties,” and even after reporting a wider net loss of S$150.6 million ($112 million) in the first half of last year from a S$2.3 million loss in the first six months of 2020.
Serving Up Revenue
In July last year, PropertyGuru announced its plan to merge with Bridgetown 2, a SPAC formed by Hong Kong tycoon Richard Li’s Pacific Century Group and US tech magnate Peter Thiel’s Thiel Capita, through a merger that values the combined entity at $1.78 billion in equity.
Krishnan said proceeds of the listing will be mainly used to finance new acquisitions by PropertyGuru as the real estate listings provider seeks to grow its fintech operations. The company already has a unit that helps Singaporeans with property financing, as businesses that provide data and software solutions to real estate developers and banks.
While Krishnan declined to name any acquisition targets, he said PropertyGuru plans to acquire businesses that will give it entry into the home services sector including providing logistics, cleaning and other services to owners moving into their new homes, citing the industry’s fragmented nature and lack of big players.
“They find their homes on PropertyGuru, if we can help them with moving and or cleaning and maintenance of the home, it’s a logical strategic extension for the group,” he said. “So M&A is gonna be a big focus and focusing on fintech, data and software solutions and home services.”
The 15-year-old group has acquired two businesses in the last 15 months in a bid to obtain a bigger slice of the market. It took over REA’s marketplace operations in Malaysia and Thailand in May 2021 after acquiring MyProperty Data, which was the biggest property website in Malaysia, in November 2020.
Post-merger, PropertyGuru is expected to raise $432 million in gross proceeds from the transaction, which includes a $299 million cash infusion from Bridgetown 2 and $100 million from investors Baillie Gifford, Naya, REA Group, Akaris Global Partners and one of Malaysia’s largest asset managers.
An existing shareholder of the group, Australian firm REA is also set to invest an additional $32 million, while existing backers KKR and TPG Group will roll 100 percent of their equity into the soon-to-be listed firm.
While PropertyGuru seeks to broaden its business, Krishnan said there are no plans for further geographic expansion as they want to focus on deploying resources across the five markets where they currently operate – Singapore, Vietnam, Malaysia, Thailand and Indonesia.
“Singapore has been operationally profitable for a number of years,” he said. “On a group level we are loss making because of the Malaysia competitive scenario, and I think obviously this year, we are hoping to change that with our market share established in Malaysia. In Singapore and Vietnam, we’ve had market leadership for many years.”
The group has failed to reach profitability in both good times and bad, recording a S$38.5 million net loss in 2019, followed by S$14.4 million in red ink for 2020 and S$150.6 million net loss in the first six months of last year, which the company chief characterised as a “one-time loss” due to a transaction through which S$125 million in preferential shares in the company were converted to ordinary shares.
In terms of adjusted EBITDA – an indicator of profitability referring to earnings before interest, taxes, depreciation and amortization – the company was adjusted EBITDA positive in 2018-2020, to sink back to a negative adjusted EBITDA of S$4.8 million in the first half of last year. The adjusted EBITDA excludes share-based payments and the cost of acquiring REA’s assets, as well as one-time and ongoing costs related to its public listing.
Krishnan is projecting the company to return to profitability this year, and predicts profits will reach S$97 million in 2025.
PropertyGuru’s latest company financial statement shows its revenues jumped 18 percent year on year to S$42.9 million in the first half of 2021, largely due to higher earnings from its core markets, especially in Singapore, with those results dampened by weaker performance in Thailand and Indonesia.