Rightmove PLC

Rightmove PLC (LON: RMV) is a FTSE 100 listed entity that runs rightmove.co.uk, the UK's largest online real estate portal and property website.

Rationale for Valuation – SELL at GBX 767.00

• Profit Booking: RMV has yielded over 15% return in the past six months, and therefore, investors can liquidate their position with decent gains as per their risk-return profile.
• Business Uncertainty: The household prices are already at a record high, and household budgets are likely to come under pressure going forward. Moreover, acute inflationary pressure and supply chain concerns can last even further with concerns related to the Omicron variant.
• Reduced Liquidity: At the end of H1 FY21, Rightmove reported a significant dip in a net cash position compared to the end FY20.
• Technical Indicator: From a technical standpoint, 14-day RSI (~57.85) approaches an overbought scenario while the stock price is hovering close to the upper Bollinger Band.
• Overvalued Multiples: On a forward 12-month basis – EV/Sales, EV/EBITDA, Price/Earnings, Price/Cash Flow and Price/Book are quite higher than the median of the Real Estate Services industry.

Key Risks

• Interest Rate Hike: The Bank of England has raised interest rates for the first time since the pandemic started.
• Macroeconomic Instabilities: The economic slowdown can impact the consumers’ spending power, while the equity market is already facing significant volatilities amid rising Omicron variant case.

Financial Highlights (for the six months ended 30 June 2021, as of 30 July 2021)

 (Source: Company Website)

• Top-line Business: The growth in customer spending and ARPA had driven revenue higher by around 58% during H1 FY21 as compared to H1 FY20.
• Strong Profitability Growth: RMV’s adjusted operating profit witnessed a surge of around 91% and reached £117.1 million for H1 FY21.
• Returns for Shareholders: The Company had returned £128.3 million of cash to shareholders in the form of share buybacks and dividends.
  

One Year Share Price Chart

 (Data Source: Refinitiv, Analysis done by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (FY21) (Illustrative)

Conclusion

As Rightmove’s stock price is hovering close to its 52-week high and has given a decent rally in the past six months, it is giving an opportunity to book profit with decent gains. Moreover, the uncertainties regarding the new lockdown restrictions with rising cases of the Omicron variant of the coronavirus, can lead to global equity sell-off and wipe-off the recent gains. Therefore, it is prudent to liquidate the position at the current level. The stock made a 52-week High and Low of GBX 782.60 and GBX 551.80, respectively.

Based on the reduced liquidity, decent gains, overvalued multiples, overbought technical stance, uncertain macroeconomic outlook, and unfavourable valuation done using the above method, we have given a “SELL” recommendation on Rightmove PLC at the closing market price of GBX 767.00 (as on 17 December 2021).

*The reference data in this report has been partly sourced from REFINITIV.

*All forecasted figures and Peer information have been taken from REFINITIV.

*Dividend Yield may vary as per the stock price movement.

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