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HPG, HiPages Group Holdings
post Posted: Nov 10 2020, 08:35 PM
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Hipages is an Australia based online platform and software as a service provider that aims to connect tradies and consumers in order to resolve difficulties that come with organising and coordinating home improvement jobs. The platform provides an efficient, technology driven model to connect consumers with qualified tradies, and facilitates the management of other elements of the home improvement process, such as communication, payment and ratings and recommendations.

At the end of FY2020, hipages had over 36,000 paying tradie customers using the platform. The majority of these tradies are sourced from Victoria and New South Wales, with those two states representing 28% and 37% of the total tradie base respectively.
Australian tradesperson matching site Hipages Group Holdings Limited (ASX: HPG) is floating this week with a market cap of $318.5 million. The company has raised more than $100 million in the IPO, at $2.45 per share.

Hipages is a website and mobile app where any Australian can post a task to be done, and tradies will bid to do the work.

Despite its evolution over 2 decades, the original intent for the site remains remarkably intact.

In the early 2000s, co-founder and chief executive Roby Sharon-Zipser and his wife bought a flat just after they married. It required extensive renovations and Sharon-Zipser was intimidated by what they had got themselves into.

I did not know how to project manage, I did not know if I could trust the tradies, I didnot know where to get the tradies, I didnot know how to pay the tradies, he told The Motley Fool. It was really complicated and we were unhappy. I thought there had to be a business opportunity there.

He then started to research a business case, which led to a surprising finding. Interestingly enough, when I spoke to tradies they were really unhappy as well, he said. They didn’t really understand how to market themselves online. A lot of the technologies and search engines were just getting started. They found it really frustrating – they had a lot of people trying to sell them really expensive products.

Why the IPO now?

Institutional investors have asked Sharon-Zipser many times about the timing of going public. Rather than third party factors like the current thirst for tech, public perception of the company and industry maturation were key.

We have started to get the right level of brand awareness. People are now familiar with the technology, he said. We are at the cusp of technology adoption for what was relatively an unsophisticated category, now wanting to take on technology. And we’ve seen an acceleration of that with COVID-19.”

The Hipages name has also been boosted by its commercial relationship with the hit television renovation show The Block.

<h2 style="text-align:start">What is the Hipages moat?</h2> The competitive advantage for Hipages, Sharon-Zipser believes, is that it has few rivals.

“We’re the only platform in Australia totally dedicated to home improvements and home services – and at scale.”

Hipages does have younger rivals such as ServiceSeeking. But Sharon-Zipser said there are no shortcuts in building a substantial directory business, so its first-mover advantage is invaluable.

“We’re talking 10 to 20 years… it takes a huge amount of time to build up a network of trades across the country. And we’ve done that.”

Media giant News Corporation (ASX: NWS) evidently agreed, buying a reported $40 million stake back in December 2015.

Just before the IPO, that piece was worth 30%. Upon the ASX listing on Thursday, News Corp will own 25.7% of all Hipages shares, now worth $81.8 million.

Hipages’ revenue comes from monthly subscription fees from tradies. There is no cost for consumers.

In financial year 2020, the company raked in $46.9 million in revenue, with a net loss of $4.16 million. Pro forma forecast for the current year is $53.9 million revenue and a $1.75 million net loss.

<h2 style="text-align:start">Hipages’ growth prospects</h2> Sharon-Zipser told The Motley Fool the company has no immediate plans to expand outside Australia.

Apparently his team has a full plate already. There are 257,000 trade businesses in Australia. We have 36,000 of them purchasing product off us. We see massive opportunity still in the domestic market.

As icing on the cake, the COVID19 pandemic impact on the home improvements industry was a complete surprise. To be fair, I did not expect the surge that we are seeing. We all saw a little bit of a wobble in March… But the recovery and turnaround within weeks was a little unexpected.
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