McGrath (MEA) 60c– a small cap way to play Real Estate

Most subscribers would be familiar with the real estate agency group McGrath (MEA). They IPO’d to big fanfare back in 2016 however the bubble soon burst with a number of downgrades and management issues saw the stock tumble from its $2.10 listing price to below 20c even before COVID took its toll. The rebound is gaining momentum though – McGrath have been certainly helped by a swift turnaround in the property market which saw them return to profitability in the first half of this year. They have no debt and more than $17m in cash at the half year result – plenty of flex to help grow and continue to take strategic positions in things like Oxygen Home Loans – a McGrath founded mortgage broking business. The company provided FY21 guidance for the first time in April, with EBITDA expected between $16.5-17.5m putting it on just ~5x EV/EBITDA and given the continuing property market commentary, this figure could be light on.