City consultancy says Zoopla to enjoy 'big upside' with Hometrack

A City consultancy has issued a note to investors backing Zoopla Property Group’s acquisition of data company Hometrack, suggested there is a ‘big upside’ for the portal firm given the potential to mine and sell data to the industry.

Jefferies - a consultancy which is an advisor to ZPG - says Hometrack’s position as the largest provider of automated valuations in the UK housing market means Zoopla can become a major player in the professional and data services sector.

“We estimate that only around 10 per cent of UK mortgage valuations currently use automated valuation services and that this market will grow significantly as the democratisation and availability of data continues to increase. Simply put, the increase in data leads to a growing demand to analyse and mine that data for commercial and profitable insight” says Jefferies analyst Anthony Codling.

The deal, which we reported here on Tuesday evening, will see ZPG pay £120m for Hometrack.

“In our view, data and professional services is the biggest of the group's addressable markets - at around £1.5 billion it equates to circa 50 per cent of the potential and it currently has revenues of around two per cent of that. The upside is therefore very large indeed when you combine the analytical teams of Hometrack and ZPG to the data within Zoopla, Prime Location, PSG, uSwitch and Hometrack” says Codling.

As usual, Jefferies adds that the key risks for a group such as ZPG are any unforseen problems with integrating new acquisitions, and “a downturn in the UK housing market leading to a material reduction in the number of estate agency branches, new-build developments and marketing budgets.”