TPFG is the UK's largest multi-brand lettings and estate agency franchise. It has been built up through strong organic growth, complemented by M&A. It has a resilient business model, underpinned by a strategic focus on Lettings and its franchise model. We estimate that 67% of revenues are recurring. This provides insulation against the housing market cycle. Despite a challenging housing market backdrop, we expect PBT to be stable in FY23 before a return to growth in FY24. Organic growth is complemented by the M&A strategy, with the most recent acquisition, Hunters Property, completed in Mar. ‘21. TPFG achieves a superior margin to its peers (39%+ EBIT margin) and consistent cash generation (average FCF conversion of 79%). We believe TPFG’s quality is deserving of a premium rating vs. peers. We set a 389p target price, using a 15x FY24 P/E multiple, and initiate with a Buy recommendation.
