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Purplebricks insider buys into recovery rally

The online estate agency has benefited from the surge in transactions following the stamp duty break
Purplebricks insider buys into recovery rally
  • The shares have more than doubled in value over the past 12 months thanks to a resurgent housing market
  • Exiting Canada and Australia helped the group turn its first pre-tax profit

Estate agencies have delivered some of the highest total returns of all UK real estate stocks over the past 12 months, helped by a thriving housing market. After falling to an all-time low in April last year, shares in Purplebricks (PURP) have more than doubled in value. Senior independent non-executive director Simon Downing has bought into that recovery rally, purchasing more than £250,000 of shares in the group. 

Housing transactions have staged a sharp rebound since the government introduced a stamp duty holiday on properties valued up to £500,000. Ahead of the initial deadline, sales agreed in March stood at almost 162,000, according to TwentyCi, a record since the property data company began collating the figures in 2016.  

However, broader market drivers are not the only reason for improved sentiment towards Purplebricks shares. In November management revealed that an increase in new instructions of around a fifth meant adjusted cash profits for the first half of the financial year would be comfortably ahead of market consensus. 

Exiting the US and Australia cut marketing costs by almost a quarter and led the hybrid estate agency to report its first pre-tax profit for any full-year or interim period since IPO in 2015. 

The consensus forecast for earnings per share stands at 1.11p for the 12 months to April, rising to 1.57p the following year. At 105p, that leaves the shares valued at a lofty price/earnings multiple of 94. Given the uncertainty over how long the housing market boom will endure and high costs incurred as it seeks to grow market share, that seems an overvaluation. Sell.  

Last IC view: Hold, 90p, 15 Dec 2020

Buys    
CompanyDirector/PDMRDatePrice (p)Aggregate value (£)
Boot (Henry)Timothy Andrew Roberts (ce)06 Apr 2021269-7199,761
ClarksonHeike Truol06 Apr 20212,79944,978
CircassiaIan Johnson (ch)01 Apr 20212928,500
CircassiaMichael Roller (cfo)01 Apr 20212950,593
CircassiaJohnthan Emms (coo)01 Apr 20212919,984
Everyman MediaAlex Scrimgeour (ce)08 Apr 2021150179,033
Hill & SmithPaul Simmons (ce)07 Apr 20211,50455,137
M&C SaatchiColin Jones01 Apr 202114444,978
Ocean Wilsons HoldingsFiona Beck08 Apr 202184242,100
PurplebricksSimon Downing06 Apr 202197250,921
RA InternationalSangita Shah (ch)06 Apr 20214649,910
Watches of SwitzerlandTea Colaianni01 Apr 202166329,954
Watches of SwitzerlandRobert Moorhead01 Apr 202167329,996
Watches of SwitzerlandIan Carter (ch)01 Apr 2021685109,167
Sells    
CompanyDirector/PDMRDatePrice (p)Aggregate value (£)
essensysAlan Pepper (cfo)06 Apr 2021252315,000
Gamma CommunicationsAndrew Stone07 Apr 20211,7601,319,856
Gamma CommunicationsAndrew Stone08 Apr 20211,770885,000
Gamma CommunicationsAndrew Stone09 Apr 20211,7801,299,699
GreggsRichard John Hutton (fd)06 Apr 20212,330209,700
Ten Entertainment*Christopher Mills01 Apr 20212292,286,565
*Christopher Mills is a non-executive director of the issuer and Chief Investment Officer of Harwood Capital LLP