Académique Documents
Professionnel Documents
Culture Documents
11/23/2014 9:20 PM
Table of Contents
Section
Investment Thesis
II
III
IV
Appendix
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I.
Investment Thesis
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Investment Thesis
Inexpensive on a standalone basis with further upside potential on optimization of the balance
sheet, independent buy-ins
Recent IPO, small float, underperformance vs. the market, weakening sentiment on housing
creates an interesting setup and opportunity
Agenda
1.
2.
3.
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Broker
Sell-side
Agent
Services Offered
Market Analysis
Exposure
Market Overview
Facilitation
Appraisal
Contracts
Broker
Buy-side
Agent
Buyer
$
200,000
10,000
Total Transaction
210,000
5,000
5,000
3,000
2,000
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Company Overview
Business Description
Status:
Public (NYSE: RMAX)
Founded:
1973
Headquarters:Denver, CO
Agents:
97,647 (2014 Q3)
Rest of
World
22%
Canada
16%
U.S.
78%
Canada
20%
U.S.
58%
S&P 500
RMAX
RLGY
120
110
100
90
80
70
9/30/13
12/19/13
3/9/14
5/28/14
8/16/14
11/4/14
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Revenue Model
RE/MAX
Traditional Broker
Commission Model
Owned by brokers
$10,000 Commission
$10,000 Commission
Agent
$9,500
Broker
$500
Agent
$6,000
Broker
$4,000
Agents
$500/Agent
+ 5% of
Commission
Local Real
Estate
Brokerage
Independent Regions
$123/Ag./Mo.+
1% Commission
Independent
Franchise
Rights
Owners
15-30% Continuing
Franchise Fees
RMAX
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Revenue Mix
Recurring
Fees
(Dependent
on Agent
Count)
Transaction
Based
59%
16%
19%
16%
Others
40%
15%
25%
Brokerage ($16mm)
10%
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Affliated
40%
Unaffiliated
60%
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Co-Founders of RE/MAX
Margaret Kelly
Vinnie Tracey
David Metzger
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10%
15%
10
Brokerage Revenue
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(in thousands)
8,000
7,000
30.6%
6,000
5,000
4,000
3,000
2,000
1999
2001
2003
2005
2007
2009
Source: Bloomberg
11
2011
2013
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(in thousands)
Regional Average Home Price
Thousands
2,400
$500
$450
$400
$350
1,900
$300
1,400
$250
$200
900
$150
South
West
Midwest
$100
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
400
Northeast
South
Source: Bloomberg
12
West
Midwest
Northeast
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($ in thousands)
$390
$370
10.0%
$350
$330
$310
$290
$270
$250
2004
2006
2008
2010
US Average Price
Source: Bloomberg
13
2012
2014
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($ in billions)
$2,800
$2,600
$2,400
$2,200
34.6%
$2,000
$1,800
$1,600
$1,400
$1,200
$1,000
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Source: Bloomberg
14
2009
2010
2011
2012
2013
2014
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$1,400,000
$1,200,000
$1,000,000
$800,000
$600,000
$400,000
$200,000
$0
1968
1971
1974
1977
1980
1983
1986
1989
1992
$ Value
Source: Bloomberg
15
1995
1998
2001
2004
2007
2010
2013
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10%
15%
16
Brokerage Revenue
11/23/2014 9:20 PM
600
7,000
500
6,000
400
5,000
300
4,000
200
3,000
100
Billions
8,000
2,000
0
1999
2001
2003
2005
2007
17
2009
2011
US Agent Count
2013
Thousands
Existing Home Sales Volume, US Real Estate Agent Count & Households
11/23/2014 9:20 PM
5.5%
5.0%
4.5%
4.0%
3.5%
3.0%
2.5%
2.0%
1968
1973
1978
1983
1988
1993
Housing turnover
Source: Bloomberg
18
1998
2003
2008
2013
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140
U.S. Brokerages
1,600
1,400
120
1,200
100
1,000
20
16
12
8
4
0
80
23% below
peak
60
800
Canada Brokerages
600
20
40
400
16
12
20
200
4
0
1978
1983
1988
1993
1998
2003
2008
NAR Membership
Source: Company Filings, Bloomberg, Morgan Stanley Research, National Association of Realtors
19
2013
11/23/2014 9:20 PM
22%
U.S.
Canada
58%
20%
20
International
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21
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22
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23
11/23/2014 9:20 PM
Homebuyer Breakdown
24
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25
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26
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27
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14.00%
12.00%
10.00%
8.00%
6.00%
4.00%
2.00%
0.00%
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
Source: Bloomberg
28
2003
2005
2007
2009
2011
2013
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200
150
100
50
0
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
Source: Bloomberg
29
2003
2005
2007
2009
2011
2013
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($ in billions)
2500
9%
8%
2000
7%
6%
1500
5%
4%
1000
3%
2%
500
1%
0
1999
2000
2001
2002
2003
2004
2005
2006
2007
Source: Bloomberg
30
2008
2009
2010
Mortgage Rates
2011
2012
2013
2014
11/23/2014 9:20 PM
($ in billions)
2500
10%
9%
2000
8%
7%
1500
6%
5%
1000
4%
3%
500
2%
1%
1999
2000
2001
2002
2003
2004
2005
2006
2007
31
2008
2009
2010
Unemployment Rate
2011
2012
2013
2014
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2009A
2011A
2012A
2013A
2014E
100,331
NA
92,071
-8%
89,628
-3%
87,476
-2%
89,008
2%
93,228
5%
96,191
3%
$113,594
$177,300
NA
$94,250
-17%
$16,010
-2%
$39,410
-17%
$149,670
-15.6%
$91,337
-3%
$16,021
0%
$32,859
-17%
$140,217
-6.3%
$86,122
-6%
$16,764
5%
$35,416
8%
$138,302
-1.4%
$85,259
-1%
$19,579
17%
$38,839
10%
$143,677
3.9%
$93,989
10%
$24,811
27%
$40,062
3%
$158,862
10.6%
$103,490
10%
$28,612
15%
$38,714
-3%
$170,817
7.5%
NA
NA
$62,368
NA
44.5%
$59,281
-5%
42.9%
$66,744
13%
46.5%
$77,286
16%
48.6%
$84,347
9%
49.4%
$16,401
$47,305
32
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Revenue
EBITDA
EPS
Lost
33
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2012A
2013A
Revenue
% growth
Implied SG&A
% growth
Adjusted EBITDA
% margin
% growth
$143,677
$158,862
11%
81,576
6%
$77,286
48.6%
16%
$170,817
8%
86,471
6%
$84,347
49.4%
9%
$187,519
10%
93,388
8%
$94,131
50.2%
12%
$199,370
6%
98,991
6%
$100,379
50.3%
7%
$218,613
10%
106,911
8%
$111,702
51.1%
11%
$233,083
7%
113,325
6%
$119,758
51.4%
7%
76,933
$66,744
46.5%
NA
2014E
2015E
2016E
2017E
2018E
$3,010
$63,734
$2,892
$74,394
17%
$3,416
$80,930
9%
$3,750
$90,381
12%
$3,987
$96,391
7%
$4,372
$107,330
11%
$4,662
$115,096
7%
$11,400
$52,334
$12,344
$62,050
$9,122
$71,809
$9,122
$81,259
$9,122
$87,270
$9,122
$98,208
$9,122
$105,975
$20,410
$31,924
22%
NA
$24,200
$37,851
24%
19%
$28,005
$43,803
26%
16%
$31,691
$49,568
26%
13%
$34,035
$53,235
27%
7%
$38,301
$59,907
27%
13%
$41,330
$64,645
28%
8%
$1.46
$1.72
17%
7%
$1.61
$1.99
16%
15%
$1.73
$2.37
19%
$2.69
13%
Adjusted EPS
% growth
% above Street Estimates
Street EPS Estimates
-2%
$1.49
34
11/23/2014 9:20 PM
2012A
$31,924
3,010
1,667
(1,578)
$35,023
2012A
($45,500)
2012A
2013A
2014E
2015E
2016E
2017E
2018E
$37,851
2,892
(638)
(1,090)
$39,015
$43,803
3,416
(2,562)
$44,657
14%
$50,623
3,750
(2,813)
$51,561
15%
$54,912
3,987
(1,994)
$56,906
10%
$62,893
4,372
(1,530)
$65,735
16%
$67,809
4,662
(1,632)
$70,840
8%
29,970
29,965
29,965
$29.84
28,842
27,719
$32.07
26,675
25,630
$34.46
25,144
24,658
$37.04
23,867
23,075
$39.80
$1.30
$1.49
14%
$1.79
20%
$2.13
19%
$2.61
23%
$2.97
14%
2013A
2014E
($27,305)
2013A
Cash
Debt
Net Debt
Net Debt / Adjusted EBITDA
2015E
2014E
$98,128
212,198
114,070
1.4x
35
($28,000)
(80,000)
2015E
$41,689
212,198
170,509
1.8x
2016E
(80,000)
2016E
$18,594
212,198
193,604
1.9x
2017E
($28,000)
(40,000)
2017E
$16,329
212,198
195,869
1.7x
2018E
(70,000)
2018E
$17,168
212,198
195,030
1.6x
11/23/2014 9:20 PM
Current
Share Price
% to current
FD Shares
Equity Value
(+) Net Debt
Enterprise Value
Implied Multiple
$30.84
$24.67
-20%
$26.21
-15%
$27.76
-10%
$30.84
0%
29,965
$924,109
29,965
$739,287
29,965
$785,492
29,965
$831,698
29,965
$924,109
114,070
$1,038,179
114,070
$853,357
114,070
$899,562
114,070
$945,768
$33.92
10%
$35.47
15%
$37.01
20%
$38.55
25%
$40.09
30%
29,965
29,965
29,965
29,965
29,965
$1,016,520 $1,062,725 $1,108,930 $1,155,136 $1,201,341
114,070
114,070
114,070
114,070
114,070
114,070
$1,038,179 $1,130,590 $1,176,795 $1,223,000 $1,269,206 $1,315,411
Metric
EV / '15 EBITDA
P / '15 FCF / Share
$94,131
$1.75
9.1x
14.1x
9.6x
15.0x
10.0x
15.9x
11.0x
17.6x
12.0x
19.4x
12.5x
20.3x
13.0x
21.2x
13.5x
22.0x
14.0x
22.9x
EV / '16 EBITDA
P / '16 FCF / Share
$100,379
$2.06
8.5x
12.0x
9.0x
12.7x
9.4x
13.5x
10.3x
15.0x
11.3x
16.5x
11.7x
17.2x
12.2x
17.9x
12.6x
18.7x
13.1x
19.4x
36
11/23/2014 9:20 PM
Comparable Companies
Franchised restaurants
Mcdonald'S Corp
Yum! Brands Inc
Burger King Worldwide Inc
Dunkin' Brands Group Inc
Domino'S Pizza Inc
Wendy'S Co/The
Jack In The Box Inc
Sonic Corp
Average
Median
Hotels
Marriott International -Cl A
Starwood Hotels & Resorts
Choice Hotels Intl Inc
Average
Median
Ticker
MCD
YUM
BKW
DNKN
DPZ
WEN
JACK
SONC
Ticker
MAR
HOT
CHH
Price
$96.26
$74.56
$32.26
$48.08
$91.50
$8.51
$71.60
$25.18
Price
$77.89
$78.39
$52.72
Equity Val
93,690
32,716
11,326
5,040
5,042
3,112
2,799
1,339
Equity Val
22,045
13,997
3,064
EV
105,587
35,191
13,339
6,708
6,535
4,216
3,324
1,768
EV
25,423
15,983
3,606
EBITDA
P/E
18.9x 17.2x 15.8x
23.1x 19.5x 16.4x
33.0x 28.1x 24.8x
27.3x 23.8x 20.1x
31.4x 26.8x 23.6x
25.5x 22.1x 19.6x
28.1x 25.1x
NA
28.6x 24.2x 21.5x
27.0x 23.4x 20.3x
27.7x 24.0x 20.1x
Net Debt/
P/E
EBITDA
2.0x
1.5x
2.3x
1.9x
2.0x
Ticker
RLGY
RMAX
Price
$43.11
$30.63
Equity Val
6,304
918
EV
10,267
1,032
EBITDA
4.6x
1.2x
2.9x
2.9x
EBITDA Growth
EPS Growth
2014E 2015E 2016E 2014E 2015E 2016E 2014E 2015E 2016E 2014E 2015E 2016E
1.2x
0.8x
2.6x
4.0x
3.6x
2.7x
1.8x
2.7x
2.4x
2.6x
10.8x
12.3x
19.7x
17.5x
17.2x
10.6x
12.5x
12.2x
14.1x
12.4x
10.4x
10.8x
16.9x
16.1x
15.6x
10.2x
11.7x
11.1x
12.8x
11.4x
9.7x
9.4x
15.8x
14.6x
14.2x
9.7x
11.1x
10.7x
11.9x
10.9x
EV/EBITDA
(5%)
13%
15%
8%
12%
19%
13%
3%
10%
13%
4%
14%
16%
8%
10%
4%
7%
10%
9%
9%
6%
15%
8%
11%
9%
5%
5%
4%
8%
7%
EBITDA Growth
(8%)
8%
37%
32%
18%
57%
30%
3%
22%
24%
10%
18%
17%
15%
17%
15%
12%
18%
15%
16%
9%
19%
13%
18%
14%
13%
NA
13%
14%
13%
EPS Growth
2014E 2015E 2016E 2014E 2015E 2016E 2014E 2015E 2016E 2014E 2015E 2016E
30.3x 25.7x
27.8x 24.6x
26.3x 23.9x
28.1x 24.7x
27.8x 24.6x
Net Debt/
Real Estate Brokers
EV/EBITDA
22.0x
21.6x
21.1x
21.6x
21.6x
P/E
16.8x
13.1x
16.6x
15.5x
16.6x
14.9x
12.2x
15.3x
14.2x
14.9x
13.6x
11.2x
14.0x
12.9x
13.6x
EV/EBITDA
36%
3%
7%
15%
7%
12%
7%
8%
9%
8%
10%
9%
10%
9%
10%
EBITDA Growth
30%
(7%)
5%
9%
5%
18%
13%
10%
14%
13%
17%
14%
13%
14%
14%
EPS Growth
2014E 2015E 2016E 2014E 2015E 2016E 2014E 2015E 2016E 2014E 2015E 2016E
38.1x 24.2x
21.0x 17.4x
29.5x 20.8x
29.5x 20.8x
37
16.8x
14.9x
15.8x
15.8x
13.3x
12.2x
12.8x
12.8x
11.9x
10.8x
11.3x
11.3x
10.6x
10.0x
10.3x
10.3x
0%
36%
18%
18%
11%
14%
13%
13%
44%
17%
31%
31%
11/23/2014 9:20 PM
2016E
2017E
2018E
Terminal
(2,562)
(2,813)
(1,994)
(1,530)
(1,632)
(4,662)
(28,000)
(28,000)
$44,657
$22,506
$55,228
$34,749
$67,675
$64,645
Cost of Equity
Perpetuity Growth Rate
Discount Period
Discount Factor
Discounted Cash Flows
7.47%
2.50%
Equity Value
FDSO
Equity Value Per Share
$1,137,886
29,965
$37.97
2015E
0.25
0.98
$10,965
1.25
0.91
$20,568
2.25
0.85
$46,966
3.25
0.79
$27,497
4.25
0.74
$49,830
4.25
0.74
$982,060
$30.84
23%
Upside of 33% represents conservative estimates for cash flows that are very high quality.
38
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$100,379
2.0x
4.0x
$205,179
$55,228
($5,380)
$49,848
26,782
-5,761
21,021
$2.06
$2.37
15%
23,194
13,468
$1.76
$1.70
$63,612
$31,806
7.0x
10.3x
$106,314
26,782
$3.97
13%
39
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It's far better to buy a wonderful company at a fair price than a fair company at a
wonderful price
-Warren Buffett, Letter to shareholders, 1989
If investing is entertaining, if youre having fun, youre probably not making any money.
Good investing is boring.
- George Soros
40
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Appendix
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41
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42
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43