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Brokers like the look of Zoopla’s latest acquisition

The online estate agent has snapped up property market analytics group Hometrack for £120mln

for sale signs on a street
There were no 'For Sale' signs in the City this morning; quite the opposite

Zoopla Property Group PLC’s (LON:ZPLA) £120mln acquisition of Hometrack, which it announced this morning, has got the backing of the City brokers.

Hometrack provides insights, data and analytics on the residential property market to more than 400 customers including mortgage lenders, developers and local authorities.

It posted underlying earnings of £8.2mln on revenues of £17.1mln in the year to December, with 70% of those revenues coming from subscriptions.

On top of the initial £120mln, Zoopla could also pay out a further £25mln over the next decade if the new addition hits various performance targets in that time.

How the City reacted…

“We are encouraged by the complementary nature of this deal which should fit well with [and] significantly strengthen Zoopla’s property services offer,” said Shore Capital analyst Roddy Davidson.

“Hometrack is a fast growing, high margin business, with a high level of recurring revenues, a strategically valuable asset, and the deal will increase Zoopla’s competitive offer.”

The analyst – who has the stock as a ‘buy’ – also expects the acquisition to be earnings accretive during its first full year of ownership.

“We remain bullish on ZPLA’s status as a prominent beneficiary of structural growth in both digital property advertising and online switching activity,” Davidson added.

“We also like its strategy of bringing together its property and price comparison businesses to unlock cross-selling opportunities, create competitive advantage, and offer a potentially unique and compelling proposition to consumers in the Home Services market.”

Fellow City broker Liberum a fan of the deal for many of the reasons above as well, but it also likes the potential Hometrack brings for expansion outside of the UK.

“Interestingly, this deal expands Zoopla into Australia where [Hometrack] provides products to all four of the leading mortgage lenders and could be the first step into exploring future international expansion,” said Liberum analyst Ian Whittaker.   

Whittaker also sees Zoopla as a ‘buy’ with a target price of 415p.

The purchase obviously has the backing of investors as well, with shares up more than 3% to 378p on Wednesday morning.

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