Moving this summary out of my previous valuation so it doesn't get deleted when I update my valuation based on latest Q4 FY22 results:

1. Overview: HPG is a clear market leader as an online marketplace for tradies, serving residential, corporate and government end-users of tradies. They have recently introduced Tradiecore, a tool available as part of subscriptions, for CRM, scheduling and payments. There is also some longer term optionality for them to play a role in the larger lifecycle of tradie work including financing, insurance, supplies, etc.

2. Management: CEO owns 6.5%. Management has been reasonably grounded and transparent in investor presentations. They haven't nailed their business model yet, but have been willing to change where needed, and recent move to subscription pricing rather than taking % of leads was sensible. Interestingly, News Corporation owns 25% - not sure if this is a pro or con, so I'll treat it as neutral.

3. Revenue: Looks like they'll do around $60m in FY22. They grew 22% in FY21 and 9% in FY22. TAM is anywhere from $10b to $100b depending on who you believe and what you include.

4. NPAT: REA and CAR are the gold standards of online marketplaces. They have averaged NPAT of around 1/3 of revenue over many years. I'm not assuming HPG can reach these lofty heights, partly because HPG doesn't yet have the scale, and also because I think the tradie marketplace is more complicated than for property or cars. HPG has achieved 26% EBITDA in the past, and said in their HY22 investor presentation they said they believe they can return to that level. FY22 operating cash flow was 20% of rev, and Q4 operating cash flow was 35% of rev. So reaching an NPAT of 15% in 5 years seems achievable..

5. Risks: 1) Recent momentum has been downward, having dropped about 60% since highs end of 2021. 2) If News Corp decides to bail from their 25% holding, there will be big downward pressure on price. 3) They haven't yet shown they can produce positive NPAT. 4) Aftermath of Covid still poses headwinds given tradie shortage, waiting list of work, meaning tradies finding it easy to find work, and aren't feeling desperate need for marketing offered by HPG.

Q4 update from Hipages: https://hipagesgroup.com.au/investor-centre/asx-announcements/

Shares got a 7% bump but I'm mixed on quality of results and will revise down my valuation a little (but still think price is in mildly attractive territory).

Revenue for Q4 up 9% on pcp, and looks like rev for FY22 will be $61m up 9% on FY21. But half of this is from acquisition, with management being open about only 4% increase like-for-like. Their explanation for slower than expected revenue growth is the high and backlogged demand for tradie work arising out of Covid. Management expressed their belief that revenue should increase as the backlog of work is fulfilled and perhaps also if economic activity slows down and tradies are looking for channels to source new work.

A strong positive is solid and growing cash flow, with Q4 operating cash flow $5.5m (35% of rev) and FY22 operating cash flow $12.6m (20% of rev).

So they are borderline for the thesis I presented 3 months ago. Back then my valuation was based on $60m rev for FY22 (tick), 15% growth for next 5 years (questionable - they grew 22% in FY21 but only 9% with acquisitions in FY22), and achieving 15% NPAT in 5 years (tick, based on current operating cash flow).

I'll revise down my valuation slightly to assume slightly lower 5-year growth of 12% pa and terminal PE of 23 (5 + 1.5 x growth).

Recommendation: buy below $1.50 for 15+% pa return.