It's a busy day in RNS-land. I'll probably work through the afternoon to cover as much as possible. 

This list is final:



Property Franchise (LON:TPFG)

  • Share price: 156.65p (+3%)
  • No. of shares: 26 million
  • Market cap: £40 million

Trading Update

Please note that I have a long position in TPFG.

This is a very pleasing update. 

TPFG is a franchisor of estate agent brands, e.g. Martin & Co. It can be compared to Belvoir (LON:BLV).

The successful franchise model has resulted in an admirable track record of high returns and cash conversion. To help demonstrate this, I'd note that TPFG gets a QualityRank of 99 from Stocko (BLV isn't bad either, at 85!).

The best counter-arguments versus these shares have been:

  • they operate in a low-growth, mature industry
  • the tenant fee ban and other regulatory threats
  • the potential for a bear market in property.

This update should help to allay some of these fears.

Firstly, trading is in line with expectations. I can see forecasts for EPS of 14.6p this year, and 15.3p next year.

Secondly, franchisees appear to be doing well when it comes to letting income: they earned nearly £6 million in lettings revenue last month, which is a new record. The success of franchisees should in turn benefit TPFG, as franchisor.

This new record comes despite the introduction of the tenant fee ban over the summer.

TPFG reports that tenant fees were previously responsible for 16% of lettings revenue. This income has very quickly been replaced, partly through growth in the sheer number of tenants but also through "shifting the burden of cost" over to landlords.

Following this success, TPFG advises that it expects to achieve "full mitigation" of the tenant fee ban by June 2020, earlier than expected.

My view - I like this stock. It's simple and easy to understand, generates lots of cash despite not deploying very much capital, and enjoys some diversification across estate agent brands and local geographies. There…

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