This report is an updated version of the report published on 9 August 2024 at 3:55 PM AEST. 

Hipages Group Holdings Limited (ASX: HPG) 

Hipages Group Holdings Limited (ASX: HPG) is an online trading platform and SaaS provider that connects traders with residential and commercial consumers to ease out the process of property improvement. It operates an online marketplace and facilitates the connection of consumers to the trade service providers in the home improvement and natural therapy sectors.

Recommendation Rationale – SELL at AUD 1.165

• Trading Around Resistance: HPG’s share price surpassed its R1 level recommended on 4 July 2024.
• Overvalued Multiples: On a forward 12-month basis, the stock is trading at a P/E multiple of 46.7x vs industry (Technology) average of 19.6x.
• Rising Expenses: HPG has been facing rising expenses for some time now. In the first half of FY24, the company's total operating expenses increased by 8% compared to the previous year, reaching AUD 29.05mn. Spending on technology and development surged by 20% YoY to AUD 2.09mn, while marketing expenses went up by 3% YoY to AUD 9.41mn. These growing costs could put substantial pressure on the company's profitability.
• Emerging Risks: The company’s success depends on the ability to retain the existing tradies and consumers on its platforms. HPG operates in a sector that is dependent on the overall level of consumer demand for home improvement services. A decline or impact in the economic environment might lead to lesser demand among consumers, which might impact the profitability of the company.
• Top of Form

HPG Daily Chart

Valuation Methodology: P/E Approach (FY June'25E) (Illustrative)

Given the increased focus on product development and technology team, expectation to generate positive free cash flow, turnaround in bottom-line, etc., the stock might trade at a slight premium to its peers. For valuation, few peers like Frontier Digital Ventures Ltd (ASX: FDV), CAR Group Ltd (ASX: CAR), Telstra Group Ltd (ASX: TLS), and other have been considered. Considering that the stock has surpassed its R1 level, share price movement, other risks associated with the business, and downside indicated by the valuation, it can face resistance at the current levels. Hence, a ‘Sell’ recommendation is given on the stock at the current price of AUD 1.165, as of 9 August 2024, at 3:51 PM AEST.

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical issues prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing. 

Note 1: Past performance is neither an indicator nor a guarantee of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is 9 August 2024. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above. 

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level at which the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: In general, it is a level to protect further losses in case of any unfavourable movement in the stock prices.