The Daily Mail's property websites join forces with fast-growing private firm Zoopla.
As well as publishing the Daily Mail and Mail on Sunday, the Daily Mail & General Trust (LSE: DMGT) owns a whole host of other media assets.
For example, DMGT owns free paper Metro, Euromoney Institutional Investor magazine, and various events businesses and websites. What's more, despite the declining popularity of newsprint, the media giant recorded revenues nearing £2 billion in 2010.
Going online
Even so, in common with other media groups, DMGT is being 'forcibly evolved' by rapid growth in Internet and smartphone usage for consuming news and other media. Hence, DMGT -- founded in 1896 -- has continued its push into publishing's digital age by merging its property assets with Zoopla, the privately owned property website.
The merger, announced on Friday, shakes up the online property business of Digital Property Group (DPG), a unit of DMGT's consumer-media division, A&N Media. DPG will merge the operations of its popular FindaProperty.com and Primelocation.com websites with those of Zoopla Limited, owner and operator of Zoopla.co.uk.
As a result, A&N Media will hold a 55% interest in the new joint venture, with the remainder owned by Zoopla, whose largest shareholders are venture-capital investors.
Taking aim at Rightmove
For many years, the online market for UK estate agents and house-builders has been ruled by one name: Rightmove (LSE: RMV). The FTSE 250 firm is the 'single, dominant player' in its field and has a market value of £1.4 billion.
Thus, by bringing together three popular property websites under one roof, DMGT and Zoopla hope to loosen Rightmove's iron grip over estate agents, property buyers and tenants. Indeed, the merged firms claim that "for consumers, the combination will provide significantly greater coverage of property listings and enhanced features to help make better-informed decisions in the UK residential property market."
Martin Morgan, DMGT's chief executive, said: "This merger will create a genuine opportunity to challenge the dominant market leader in the online property sector. We believe that the combination of our respective digital property assets will benefit both consumers and clients."
Both firms have informed the Office of Fair Trading (OFT) of their intention to merge. Nevertheless, I can't see the OFT having any objection to the creation of a strong second player in this field.
DMGT versus Rightmove
Here is a quick-and-dirty 'head to head' of DMGT's and Rightmove's fundamentals:
| Company | Share price
(p) | Market value
(£bn) | P/E ratio | Dividend yield (%)
and cover |
|---|
| DMGT | 407 | 1.5 | 8.4 | 4.5%
(2.8x) |
| Rightmove | 1,281 | 1.4 | 27.8 | 1.4%
(2.7x) |
As you can see, Rightmove shares trade on a forward price-earnings ratio of nearly 28, more than three times DMGT's modest rating of 8.4. Similarly, Rightmove offers a forecast dividend yield of 1.4%, which is less than a third of DMGT's chunky income of 4.5% a year.
As a value investor, I know which share I'd buy every time: DMGT.
While Rightmove may have a bright future online, I'm far from convinced that DMGT's days are numbered. As the publisher of the most popular mid-market paper for professional British women, I'm certain that the Daily Mail will be printed for decades to come!
More from Cliff D'Arcy:
