Integrating Job And Lead Management Will Strengthen The Value Proposition For Tradies In The Future

Key Takeaways

• The hipages tradiecore platform enhances value for tradies, driving recurring revenue growth and ARPU, with future revenue growth implications.
  
• Transition to higher-tier subscriptions and optimized lead pricing to improve revenue and net margins by capturing more value from tradie engagements.
  
• Economic pressures and tech spending are challenging growth, with unclear benefits from integrations and expansions risking earnings and revenue stability.

Catalysts

Operates as an online tradie marketplace in Australia and New Zealand.

• The successful launch of hipages tradiecore as a single platform consolidates job management and lead management, expected to enhance the value proposition for tradies and increase recurring revenue and ARPU. This is likely to drive future revenue growth.
  
• Transitioning to higher-tier subscription plans and optimized lead pricing is anticipated to improve revenue and increase net margins by capturing more value from tradie engagements.
  
• Achieving positive free cash flow and maintaining strong financial discipline sets a foundation for future EBITDA expansion and provides capital for potential reinvestment into growth initiatives.
  
• Expansion into New Zealand with a transition from a transaction-based to a subscription model projects strong ARPU growth, which can positively impact revenue and earnings.
  
• The strategic focus on technology adoption in job management presents significant growth potential in new service offerings, enhancing future revenue streams and margin expansion as tradies adopt more productive solutions.

hipages Group Holdings Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming hipages Group Holdings's revenue will grow by 11.3% annually over the next 3 years.
• Analysts assume that profit margins will increase from 4.7% today to 8.3% in 3 years time.
• Analysts expect earnings to reach A$8.7 million (and earnings per share of A$0.06) by about February 2028, up from A$3.6 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting A$10.1 million in earnings, and the most bearish expecting A$7.4 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 32.9x on those 2028 earnings, down from 48.9x today. This future PE is lower than the current PE for the AU Interactive Media and Services industry at 48.9x.
• Analysts expect the number of shares outstanding to grow by 0.65% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.98%, as per the Simply Wall St company report.

hipages Group Holdings Future Earnings Per Share Growth

Risks

• Subdued consumer demand due to the current economic environment resulted in a 6% decrease in job postings year-over-year, which may impact future revenue growth.
  
• The technology spending to support platform enhancements and new features could pressure net margins if not balanced by corresponding revenue gains.
  
• The full benefits of the tradiecore integration are yet to be realized, with the impact on retention rates and net subscription growth remaining uncertain, potentially affecting earnings stability.
  
• While hipages anticipates significant growth in the tradie management software market, low current adoption rates may slow revenue growth from this segment if the expected shift doesn't materialize quickly.
  
• Expansion efforts in New Zealand are still in transition, and the business shift from a transaction-based to a subscription-based model carries risks of revenue fluctuations during the adjustment period.

Valuation

• The analysts have a consensus price target of A$1.727 for hipages Group Holdings based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of A$2.13, and the most bearish reporting a price target of just A$1.45.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be A$105.1 million, earnings will come to A$8.7 million, and it would be trading on a PE ratio of 32.9x, assuming you use a discount rate of 7.0%.
  
• Given the current share price of A$1.3, the analyst price target of A$1.73 is 24.7% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.