99 Group doubled sales bookings in 2020, eyes aggressive expansion

Singapore-headquartered property startup 99 Group has doubled its sales bookings in 2020 despite the Covid-19 pandemic, a source familiar with the firm tells Tech in Asia. It is in advanced discussions to secure funding that will fuel its expansion beyond Singapore and Indonesia.

Part of this proposed deal would involve an investor buying out Australian property firm REA’s 27% stake in 99 Group, along with pumping in fresh expansion capital. This move would free up 99 Group to pursue its aggressive growth plans, Tech in Asia understands.

In a public filing, REA confirms that it is looking to divest its interest in 99 Group, and that discussions on the matter are “well progressed.”

Photo credit: 99 Group

The company is also transitioning from a classifieds model, which some say is on a decline, toward becoming more of a transaction platform. In other words, it seeks to smoothen the entire process of buying and selling properties rather than simply matching property agents with homeowners, our source adds. In the automotive industry, Carro and Carsome have similarly eschewed the advertising model.

Property classifieds in Southeast Asia appear to be going through turbulence. 99 Group’s rival PropertyGuru experienced a slight dip in revenue and valuation last year. REA, meanwhile, is paring down its involvement in Southeast Asia: It’s in the midst of selling its Malaysia and Thailand units to PropertyGuru.

Most of 99 Group’s bookings growth comes from its subscription plans with property agents, which allow them to list on its platform. Under accounting rules, the bookings, which are paid upfront, won’t be fully recognized as revenue until the plans, which typically last for 12 months, are used up.

Our source says that 99 Group doubled its bookings in Q1 2021 compared to the same period last year, while revenue grew by 50%. While some of that growth may have come from its joint venture with REA, that only accounts for 10% of it, the source clarifies.

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Looking ahead, buying out REA serves 99 Group three purposes: It removes conflict of interest, since REA is forbidden by its shareholder agreement from owning stakes in 99 Group’s competitors, our source explains. It also frees 99 Group to chase aggressive expansion plans that would put profitability in the backseat, which may contradict REA’s need to show a growing bottom line to please public shareholders.

Last but not least, the move would allow 99 Group to expand into Malaysia, which is forbidden in the terms agreed to by both companies. REA could not immediately respond to Tech in Asia’s questions.

99 Group confirms that it is chasing growth plans that would require venture capital or private equity funding.

“We have an ambitious plan that requires risk capital and a growth mindset to completely disrupt the market. However, the thing we have learned is that this does not fit well with a public listed company, which needs to focus on quarterly results,” says Darius Cheung, CEO of 99 Group, when asked to comment. “This move allows us to be free from the shackles of having our most significant shareholder being a public company and needing to roll in our numbers into theirs.”

The startup is aiming to double its revenue annually for the next three years, our source tells us.