P.E. Analytics Ltd (PROPEQUITY) – Another Data Analytics Platform for Real Estate Players

Excellent thread on what looks like a promising business.

Key questions are:

Subscription

1. 80% retention is low – to achieve 20% growth, they need to make 40% from new client wins / existing customer x-sell (doesn’t look like much chance of x-sell yet). That’s not happening! Strong growth in overall business is masked by the web subscription business growing at c.10%, which is less impressive for a company of this size. This is not a SaaS business, but as a reference, best in class SaaS businesses have 90-95% gross retention (i.e. from purely existing customers reducing spend / churning) and net retention ratio of close to 105-110% (through x-sell / price increases etc.)
2. What is the level of recurring level of customer usage of this platform? i.e. why can’t customers buy it in a year, download reports / take screenshots on reference benchmarks and cancel their subscription because of low usage? Sure, they keep refreshing this database with new properties and that’ll be appealing to the likes of KKR / Godrej / HDFC Bank etc. which are large spenders, but for a marginal developer where they are trying to target incremental sales to, I am not sure if there’s a need to keep purchasing this annually

CRM

1. I’m actually more bullish on this opportunity as this is a high frequency, transactional nature (think like payments), and clearly they’ve got the right data to augment banks’ internal assessments with their valuation / collateral management tool. Unsurprisingly, this has grown at a rapid pace, and there’s more to come out of it. Whilst for their current scale, it should be fine, as they capture a large share of the market, they’ll be exposed to real estate cyclicality imo

Other

1. Why is so much cash sitting on their books? Have they got a definitive M&A pipeline? This is not a pharma business where you need to invest into capex / product pipeline.
2. How closely linked is the business growth to current real estate upcycle? Do we expect growth to sustain if the real estate activity slows down?
3. Why are they already thinking about international expansion? What data have they got outside of India? India TAM itself must be big. I mean Zomato tried going to the middle east, and they scaled down because they realised they haven’t got the expertise. I’d rather bet on a business that sees a market fully
4. Their pricing needs more thinking (and transparency), as charging just 10L p.a. to top-tier PEs like KKR or Blackstone and large banks like HDFC Bank is criminal. With a professional investor, they could make significantly more

Overall, feels like a strong business with a moat, but as always, some questions loom over given low coverage. Would be nice to get views from other forum members who’re tracking this stock.