The iProperty group is the leading player in the South East Asian property portal market. The group owns and operates leading sites in Malaysia, Singapore, Indonesia, Macau and Hong Kong and has a market cap of over US$170 million.
However, this has not always been the case. In early 2009, the company had a market cap of just US$6m, its revenues and business growth had stalled, and there was no clear strategy in place.
In mid to late 2009, I had the opportunity to invest in the iProperty Group, join the Board and become the Chairman, and to provide strategic advice and guidance to help turn around the business.
In part one of the article, I looked at what were the main drivers of the rapid decline of the iProperty share price and thus market cap. These included acquisitions being easier than operations, the focus on centralization rather than local operations, the quality of the leadership team, and the management of market expectations.
In part two of the article, I look at the specific actions that were undertaken to transform the business and release value by propelling the share price from 6 cents to its current trading level of around US$1.00.
In particular these involved getting clarity in the overall strategy, putting a new management team in place, reinvigorating the Board, attracting a strategic external investor and ensuring that the acquisitions were focus on improving the overall market leadership position.
Clarity in Strategy
The first step in turning the business around was to work with the Board and Senior Management on the business strategy.
iProperty had portals in multiple countries, print publications, a software product, and an exhibition business. For any business, let alone a start-up, this was way too much to handle. The objective was to work out where real long-term value will come from and therefore where management efforts should be focused.
The outcome of this was that Hong Kong, Singapore, and Malaysia were clearly the markets on which iProperty should focus while the Philippines, India, and Taiwan were deemed a distraction to the business.
Therefore the investment in Taiwan was exited (i.e. written off), the Indian shareholding was left dormant at 25% with no further investment, and the Philippines website was put into hibernation (i.e. no one working on it).
Within the three remaining markets, the focus was on the online businesses rather than print, software, or exhibitions. The last three were seen as methods to improve overall awareness and efficiency of the online advertising business.
This clarity in strategy meant the business was able to better allocate resources to drive stronger results in each market. The results can be clearly seen in the strongly improved performance of the Malaysian online business.
A New Management Team
The next area reviewed was the ability to execute the strategy. In any business this comes down to management. It was clear that a more experienced management team was required and that core roles, such as the CFO, needed to be in sourced.
The first step was to appoint a new CEO. Shaun Di Gregorio was someone that I had worked closely with at the REA Group. For nearly 8 years we had worked together in growing that business and I believed that Shaun was the ideal candidate to run the iProperty Group. He joined the company in early 2010. His impact was immediate as he brought a new level of professionalism to the business.
A new CFO was appointed who understood both the online world and the ASX. Rod Brandenburg came from web jet and helped add significant value to the business.
A new CIO was also sourced from the REA Group. Clearly Andy Kelk had a strong knowledge of online real estate and was ready for the next step to being CIO of the iProperty Group.
Finally, several new country managers were appointed to run the operations in Hong Kong, Singapore, and Malaysia.
This new Senior Management team brought a higher level of focus, understanding, and passion to the business that helped release significant value through strong operations focus.
The result was that revenues grew rapidly from US$4m in 2009 to US$15.5m in 2012.
Reinvigoration of the Board
The Board in 2009 was a little short on relevant industry knowledge. As we saw in Part 1, it was probably a case of the Board learning as fast as the business in what was required to run one of these businesses rather than leading the business in the right direction.
It was important to bring additional industry skills and knowledge to the iProperty Group Board. Two new Board members were appointed.
Georg Chmiel was someone that I had worked with and was appointed to the Board. Georg brought in-depth industry knowledge and experience having been the CFO of the REA Group for 6 years and had recently been appointed the CEO of the LJ Hooker Real Estate Group. Georg's key skills lay in the ability to understand the numbers and thus lead the audit committee as well as being able to bridge the gap between finance, strategy and operations. He is definitely a key member of the Board.
With the placement to Seloger in France, Roland Tripard (the CEO of Seloger) joined as a Director bringing in-depth industry knowledge and experience to the iProperty Group Board. He also added practical and relevant experience to the Board.
To help drive growth, it was clear that additional funds would be required. While mechanism such as rights issues could be used to raise additional capital, there was an opportunity to do a placement with a strong industry partner. A process was conducted in 2011 in which a number of major industry players were asked if they would like to invest in the business. Two actually conducted due diligence and made a bid with Seloger being the successful applicant. They invested $8.9m for a 9.4% stake in the company.
The result is that the iProperty Group was cashed up, had access to additional skills and resources, and had clearly announced its presence on the world stage.
The final area to work on with the iProperty Group was how they approached acquisitions. The focused changed from rapid, almost ad hoc acquisitions, to more strategic acquisitions that clearly helped reinforce the presence in the key markets.
In particular the iProperty Group:
The clear objective of these acquisitions was to either reinforce the market leading position in Singapore or Malaysia or to acquire a leadership position in Indonesia and Macau.
The changes have set the right tone in the market and there is now strong expectations built into the share price. The challenge for the Board and Management is to deliver against these expectations.
Simon Baker is the former Chairman of the iProperty Group. In 2009 he invested into the iProperty Group, become Chairman and lead the corporate structuring of the business. During his time as Chairman, the company's share price increased from 10c to $1, the business increased revenues from $4m to $15m, the company attracted quality Senior Management, and iProperty completed multiple capital raising to ensure it was fully cashed up.
Simon is also the former CEO and MD of the REA Group. In 2000 he did the deal for News Corp to take at 42% stake in the REA Group. Between 2001 and 2008 he was responsible for turning the business around growing revenues from $4m to $155m, turning a $6m loss to a $35m profit, and growing market cap from $8m to a high of just under $1bn.
Today Simon invests in and provides strategic and operational advice and guidance to a range of property portals around the world. He can be contacted at [email protected]