PropertyGuru stock under pressure as JMP highlights limited upside post-merger By Investing.com

On Tuesday, PropertyGuru Group Ltd (NYSE:PGRU) was downgraded by JMP Securities from Market Outperform to Market Perform.

This adjustment follows the company’s recent merger agreement to be acquired by EQT (ST:) Private Capital Asia. The deal, valued at $1.1 billion, has led to the stock trading near the purchase price, prompting the reassessment of its rating.

The analyst from JMP Securities noted that with the stock now trading near the acquisition price, PropertyGuru shares are considered fairly valued.

This valuation is based on the company’s current enterprise value to estimated 2025 earnings before interest, taxes, depreciation, and amortization (EV/2025E EBITDA) multiple, which is approximately 31 times.

The merger agreement is anticipated to be finalized in the fourth quarter of 2024 or the first quarter of 2025. EQT Private Capital Asia’s acquisition is not expected to face competing bids, and the merger will likely proceed as planned without any significant obstacles.

The analyst believes that, given the circumstances, there is no further upside to the stock’s value at this time. The current market performance rating reflects the belief that PropertyGuru’s share price will remain stable in the near term, aligning closely with the terms of the acquisition.

Investors and market observers will monitor the deal’s progress as the expected closing date approaches. The merger’s completion will mark a significant milestone for PropertyGuru and its stakeholders.

In other recent news, PropertyGuru Group Ltd experienced a change in its stock rating as Citi downgraded it from Buy to Neutral, increasing the price target to $6.70.

This comes from the company’s announcement about a going-private transaction, valuing the equity at approximately $1.1 billion. The board of directors, backed by significant shareholders TPG, KKR, and REA, unanimously recommended the deal.

In its Q1 2024 earnings call, PropertyGuru reported a 12% increase in revenue, reaching $37 million, and a solid double-digit growth in its adjusted EBITDA margin. This shows effective cost management across its marketplaces, even amidst challenges in the Singapore and Malaysian property markets.

The company also introduced new AI video features, professional agent verification, and data and software solutions, demonstrating its commitment to innovation.

Despite a slow start in Singapore and housing affordability issues in Malaysia, PropertyGuru achieved a record-high EBITDA margin in Singapore and saw signs of recovery in Vietnam. However, the company acknowledged that gaining market traction in Australia takes longer than expected.

InvestingPro Insights

Amidst the recent downgrade by JMP Securities and the merger agreement with EQT Private Capital Asia, PropertyGuru Group Ltd (NYSE:PGRU) presents a mixed financial landscape according to InvestingPro data. With a market capitalization of approximately $1.08 billion, the company’s revenue growth has been positive, at 9.76% over the last twelve months as of Q1 2024, and a quarterly revenue growth of 11.91% for Q1 2024. Despite a non-profitable status over the last twelve months, the company’s gross profit margin remains robust at 50.45%.

InvestingPro Tips highlight that PropertyGuru holds more cash than debt on its balance sheet, which could be a reassuring factor for investors considering the company’s liquidity position post-merger. Additionally, the company has seen a significant return over the last week, with a price total return of 13.91%. However, analysts do not anticipate the company will be profitable this year, which may temper expectations for near-term earnings growth.

For those interested in a deeper dive into PropertyGuru’s financials and future outlook, InvestingPro offers additional insights and metrics. There are 10 more InvestingPro Tips available at https://www.investing.com/pro/PGRU, providing a comprehensive analysis for investors and market observers monitoring the company’s performance as the merger agreement progresses.

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