Our Housing Team – led by Josh Steiner and Christian Drake – will be hosting a deep dive institutional call on our Re/Max Holdings (RMAX) call.
The call will take place on Thursday June 8, at 1pm ET.
Email sales@hedgeye.com for more information.
KEY DISCUSSION POINTS:
BULL CASE:
- Ambitious Rollup Strategy- A key component of the company's post-IPO strategy, Re/Max has a tremendous rollup opportunity over the next 3-5 years. Since going public in September 2013, Re/Max has reacquired 14K agents and 6 regions that were previously independent. In the US and Canada 10 regions and 30K agents are independent today - this presents a massive rollup opportunity that should boost Re/Max's earnings power substantially.
- Potential Housing Bull Market- The intermediate to longer term outlook for the US housing market remains auspicious, and Re/Max is positioned to benefit from these favorable conditions. With Millennial and First-Time home buyer activity beginning to pick up and expected to steadily increase over the coming years, Re/Max's focus on homes in the bottom two-thirds of the price spectrum puts the company in a prime position to capitalize on this generational tailwind.
- Motto Mortgage- Re/Max introduced the Motto Mortgage franchising opportunity in October 2016 as a vehicle to take advantage of the pull back in mortgage lending by the banking community. The decrease in mortgage origination by large banks has created an opening for new players to enter this market and since home sales and mortgage origination go hand in hand, this presents a significant opportunity for Re/Max to grow top line revenue. Re/Max intends to build a store-within-a-store (or franchise-within-a-franchise) concept by planting Motto franchises within Re/Max franchises. Motto makes sense economically for Re/Max offices with 20 or more agents, which is roughly one third of all Re/Max offices.
BEAR CASE:
- Canada- We think the Canadian housing market is ripe for a massive correction. At roughly 13% of total revenue, Re/Max's exposure to Canadian housing is not insignificant, and this presents a substantial risk to the company's future earnings.
- Sky-high Valuation- Re/Max trades at a very significant premium to peers. Is the current valuation justified, or have shares more than fully discounted the coming consolidation of independent regions and Motto?
CALL DETAILS
Ping sales@hedgeye.com for more information. Please note if you are not a current subscriber to our Housing research there will be a fee associated with this call.
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