New Zealand-based Trade Me (TRMEF, Financial) is a combination of Craigslist and eBay. Profit margins are high and the company has put up decent growth. The stock is trading at a reasonable price level.
There are 397 million shares, the stock trades at 4.66 New Zealand dollars ($3.33) and the market cap is NZ$1.85 billion. Earnings per share were 18.87 cents and the stock trades at a price-earnings ratio of 24.7. The dividend was nine cents and the dividend yield is 1.93%. The stock seems reasonably priced.
The company made NZ$218 million last year and earned NZ$74.9 million in income. Sales were NZ$142 million. Growth has been fantastic. Return on equity is 11.17% and operating margins are 52.1%. Ebitda was NZ$145.5 million and an Ebitda margin of 66.7%. That is an impressive Ebitda margin.
The balance sheet shows NZ$34.1 million in cash and NZ$14 million in accounts receivables. The liability side shows NZ$20.1 million in payables and NZ$135.8 million in debt. Pretty decent balance sheet. Cash flows from operations were NZ$122.7 million and capital expenditure was NZ$5.547 million. Free cash flow was NZ$117.1 million and the stock trades at a free cash flow yield of 6.3%. Not a bad yield considering the company is growing. Much of that free cash flow is paid out in a dividend.
Trade Me is a cross between eBay (EBAY, Financial), Craigslist, Monster.com and several online search tools. The company makes 30% of its revenues off of general items. This is similar to eBay. Twenty-seven percent of revenues come from motors, the selling of cars. Property makes up 14.5%. I would be interested to see the financials of an American property website. It is so difficult to sell a home without a real estate agent in the U.S. Jobs compose 10%. I have paid quite a bit over the years advertising for jobs available on Craigslist and know that employers are always willing to pay up for good employees. For the rest: 8.3% comes from advertising, 2.7% comes from life insurance, 2.2% is payments, which is like Paypal I am guessing, and 4.8% from other.
A peer-to-peer lender named Harmony was purchased in January of last year. I assume this shows up in the "other” category. Trade Me Insurance sells home and auto insurance. The company segregates all sales into three categories: 30% General, 51.7% Classifieds and 18% Other. It seems that Trade Me is closer to Craigslist than eBay. At the annual meeting, the chairman of the board mentioned that the travel and dating sites face a lot of international competition. Watch the annual meeting video to learn more. This guy at the Motley Fool in Australia does not like the stock.
Looking at the main website, it looks like modern day want ads. It does not look slick like American websites. It shows used items like shelves and tables, dating and used cars. There is also a coupon section (I cannot wait for the day in the U.S. when grocery stores stop mailing coupons. They absolutely clog up my mailbox). So I am looking at a $20 drain plug, grocery coupons, dating, a bunch of used cars and job postings. The site is very incongruent. Having said that, it seems to make money.
I like Trade Me. I like the profit margins and growth. I would be curious to find how the eBays and Craigslists of the world do in New Zealand. My one concern is that in a country of four million, one entrant from the U.S. in e-commerce could substantially take a hunk of Trade Me’s sales.
Disclosure: We do not own shares.
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