The Hipages Group Holdings Ltd (ASX: HPG) share price has finished the day up 1.93% to $3.70 after announcing the acquisition of New Zealand’s leading online trade marketplace Builderscrack.
HPG share price
Hipages moves into NZ
Hipages has bought its smaller peer to unify trade classifieds in Australia and New Zealand.
The acquisition will cost $11.8 million and be largely funded (80%) through existing cash reserves.
A smaller share (20%) of the purchase will be funded through the issue of new Hipages shares.
Builderscrack will provide Hipages with exposure to 4,000 active tradies and 200,000 registered homeowners.
In FY21 the platform posted 95,000 jobs on its platform and has facilitated NZ$250 million in job value since its inception in 2007.
Commenting on being purchased by Hipages, Builderscrack General Manager and Co-Founder, Jeremy Wyn–Harris, said:
“As Australia’s leading online tradie marketplace, hipages Group is a natural partner for us, and joining forces with Roby and his team will enable us to take our business to the next level. We look forward to learning from them and sharing ideas, as well as rolling out new products and services to add value for our tradie customers”
Show me the money
Despite the large total addressable market (TAM) of $25.6 billion, Builderscrack has just $2.6 million in revenue.
The business grew at 24% in the past financial year with an EBITDA of $1 million.
Despite being the market leader in New Zealand, Builderscrack has a less than 1% share of its highly fragmented TAM.
Positively, Builderscrack is working capital and operating cash flow positive.
Overall, the acquisition will add $2.3 million to Hipages revenue for FY22.
My take
Builderscrack looks to be a couple of years behind Hipages in terms of penetration.
Hipages believes it can use its own expertise to grow its latest purchase.
“We will supercharge their growth by leveraging the strategic and operational experience we gained from scaling our business in Australia, as well as helping them to grow their brand to capture the huge market opportunity in New Zealand” – Hipages Group CEO and Co-Founder, Roby Sharon-Zipser
However, investors should be wary of simply duplicating the success of one market and assuming it will occur in a new one.
Does this take management’s attention away from the Australian operations, which is more than four times larger than New Zealand?
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