Shares in lettings agency Martin & Co (MCO) jumped 16 per cent on their 18 December debut on Aim, underlining the market's appetite for stocks with exposure to the housing sector.
With 187 offices, mainly in the South East and the Midlands, Martin & Co runs one of Britain's largest lettings networks from its Bournemouth base. Its diminutive stock market size - currently just £25.5m - reflects the capital-light franchise model. It owns just two of its branches in-house, and has no intention of owning more, says chief executive Ian Wilson.
The flotation served two functions. First, it allowed the founders, Richard and Kathy Martin, to sell about a third of their stake to investors. Second, the company has raised £4m in new funds, which will be used to consolidate the highly fragmented lettings market. Over the year to September, the company took on 1.9 per cent of all new instructions, according to data provider Vizzi Home. Only two companies - the full-service housing service groups Countrywide and LSL - had a higher market share.
It is tempting to draw a parallel with Belvoir Lettings (Aim: BLV), which listed in February 2012 with a virtually identical strategy. At 185p, the shares have more than doubled since their flotation price of 75p. Last month, Belvoir used its Aim listing to raise more cash, partly to support two franchisees with ambitions to acquire a lettings portfolio in the Cheshire and Merseyside regions. This is just the kind of deal for which Martin & Co wants to use its new cash pile.
Interestingly, both companies also want to expand into the sales market. Martin & Co started offering estate agency services last year, while Belvoir launched a year-long trial at 10 branches in September. A trading update from Winkworth (WINK), another Aim-listed franchise business that makes about 60 per cent of its turnover from home sales, makes clear why. Thanks to snow-balling sentiment, revenues in the third quarter were up 24 per cent - more than analysts expected, prompting a 7 per cent leap in the share price. Winkworth expects about 15 per cent more housing transactions next year than in 2013, but flat rents "as sentiment switches to the sales market".
