Date of inclusion: 17 December 2021
Share price on inclusion in Marc & Stuart’s Top Picks: $0.185
52-week range: A$0.16 / A$0.385
Risk Level: High
RateMyAgent keeps real estate agents honest
RMA Global owns RateMyAgent, a platform that allows real estate agents to receive independently verified ratings from their clients. Around 75% of all active real estate agents in Australia are on the platform, where agents pay subscription fees and promoter fees that helps grow their business. RMA Global has been growing strongly in Australia, New Zealand and the United States.
Growth driven by US market activity
In FY21 RMA Global revenue rose 53% to $11.3m. The big growth driver right now is in the US market, which is obviously going to be huge for RMA, not just because of the size of the country, but because of the sheer number of agents. Unlike Australia, there are agents to handle both sides of a property transaction, so per capita there are more agents that RMA can serve. As of September 2021, there were about 156,000 agents on the US platform, up 93% on September 2020. Reviews on the US platform are rising even faster, up 265%.
Moving towards cash flow positive
In the September 2021 quarter cash receipts from customers rose 43%, to $3.8m. Operating cash outflow of $2.1m in that quarter reflects the fact that RMA is investing in its US headcount so it can grow the business over there. As at the end of the quarter there was $8.6m cash. EBITDA profitability is still some years away, but the company believes that it can become cash flow positive on a monthly basis before FY22 is out.
Strong insider buying
Chairman David Williams has been buying the stock in December 2021. Williams’ other success stories include Medical Developments International (ASX: MVP) and Polynovo (ASX: PNV).
UPDATE 17 January 2022
Reason for update: Announcement on progress in the US
Hitting milestones in the US
RMA Global, the people that bring you RateMyAgent, updated the market last week on its progress in the US. The company recorded 76% year-over-year growth in the number of real estate agents on its US website, to 176,000 agents. In addition, RMY added 200,000 customer reviews in 2021 and ended the year with 283,000 customer reviews of the real estate agents on its US site. This represents a growth of 330% year-over-year. As off last week, the number of reviews in the US had grown to more than 300,000.
Importantly, the number of reviews is a lead indicator of revenues, i.e. as more customers (vendors) put up their reviews of the agents they used to sell their house, the more attractive the platform becomes for agents themselves. In turn, this triggers more reviews, and so on. This is called the network effect.
And the more reviews an agent gets, the more likely they are to spend more through RMY’s platform, including on Social Media marketing of their listings.
Taking its lead from Australia
In Australia, the average agent has 20 reviews on the RateMyAgent platform with the total number of reviews around 1.2m currently. In the US, by contrast, that average is below 2 at the moment. However, if the Australian experience is any guide, the US may see more than 27m reviews in due course, at least according to RMY’s own calculations.
Additionally, in Australia the average agent spends $630 per month on Social Media marketing through RateMyAgent. In the US that number is only $110.
When we combine the fast growth of agents on RMY’s platform in the US with the more than fivefold potential increase in average agent spend on the platform, you can see why we are so bullish on RMY and why we included the stock in Marc & Stuart’s Top Picks.
You can check all the numbers RMY published here.