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Small-Cap with Disruptive Real Estate Agent Platform Provides 'Blue-Sky' Potential

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As the groundbreaking real-estate industry platform provides "disruption from the inside," the company moves to monetize its asset.

Publicly traded small-cap RESAAS Services Inc. (RSS:TSX.V; RSASF:OTCQB) is changing the way real estate professionals do business. Its award-winning cloud and blockchain technology platform enables real estate brokerages, franchises and MLSs to bring real-time communication, simplified transactions and valuable data to their agents on a global basis. This allows RESAAS subscribers to do more business through more connections.

Like other successful networking platforms in their early stages, such as Facebook, LinkedIn, etc., RESAAS is aggregating valuable data and beginning to monetize various features that don't exist elsewhere in the real-estate world today, creating multiple revenue streams.

"As a real estate B2B SAAS company, increasing subscribership is a defining growth metric for RESAAS, and we see their continued growth as a bullish sign for the company's growth prospects." - Siddharth Rajeev, Fundamental Research

RESAAS' platform has been catching on quickly. The world's two largest real estate firms, RE/MAX and Keller Williams, have signed on to use RESAAS' platform. About a dozen of the larger real estate associations in the U.S. also use RESAAS' technology, including the real estate associations in San Francisco, San Diego, Oakland, Miami, the entire state of Rhode Island, Beverly Hills and the Greater Los Angeles Association of Realtors.

Real estate professionals have been flocking to the platform. The technology is now used by over 460,000 agents globally, 90% of whom are in North America.

Investor and newsletter writer Nick Hodge told Streetwise Reports that RESAAS' platform is "connecting real estate agents, brokers, franchises and Multiple Listing Services, all the various components of the real estate industry. That has never really been done before. RESAAS is disrupting the entire real estate industry by creating a kind of Facebook for real estate agents."

"By already being able to sign up two of the largest real estate firms in the world, RE/MAX and Keller Williams, and already having over 400,000 users, that creates critical mass; it already has its customers on its platform and has their attention," Hodge added.

And although the company is still young, RESAAS has multiple revenue streams:

Agent Referrals

RESAAS' technology acts as a matchmaker to enable agent referrals. An agent in one region can use the platform to refer a client to an agent in another region.

The referral process has been made easier with the launch at the end of October of a new system called RESAAS Pay to send and receive referral fees, the first of its kind in the real estate industry.

"The old system of paying agents referral fees was very clunky, slow and expensive. With RESAAS Pay, an agent can pay another agent with a credit card; it's elegant, secure and quick," Tom Rossiter, CEO of RESAAS, told Streetwise Reports. "It also opens a new revenue stream for the company because we charge a transaction fee."

Referrals have the potential to become a major revenue stream, Nick Hodge noted. "The revenue on referrals has the potential to grow from about $1 million to probably $10–12 million, so a 10x jump just on that business," he stated.

In addition, last summer RESAAS contracted with Realty Universal, a company that provides agent-to-agent services, to develop a private network on its platform for 6,000 members, specifically for conducting referrals in the U.S.

Premium Subscriptions

"In addition to revenue from referrals, there are a lot of moving components and other sources of revenue that we can call blue-sky that make this investment in RESAAS very exciting, including premium subscriptions and data collection," Hodge relayed.

RESAAS is converting some of its users to premium subscribers. For $30 a month, agents gain benefits not available in the no-cost version.

"Currently about 1% of users have switched to the premium subscription, but about 10% are anticipated to do so," investor and newsletter writer Nick Hodge told Streetwise Reports.

"If RESAAS can convert 10% of its members to premium status, that would create about $14 million in annual revenue," Hodge calculated.

Data Collection

Many real estate agents sell houses in the pre-market, where the transaction exists between two agents, and the sale will never be available on MLS, Zillow, Trulia or other public sites. In addition to making the connections that make the private sale possible, RESAAS is able to capture the sales data.

"That data is extremely valuable because it does not exist anywhere else," Tom Rossiter, CEO of RESAAS, told Streetwise Reports.

"Companies like Zillow, Trulia and CoreLogic are interested in this kind of information for data analysis or determining trends in real estate markets on a regional and local level. All this transaction data is very much a big business these days," Hodge stated.

In addition, last July RESAAS signed a memorandum of understanding to form a joint venture with San Francisco-based Real Estate Consortia Inc. to track and capture household data, such as loans backing the properties and transaction history.

Collaboration with Canadian Real Estate Investment Firm

RESAAS has an international reach. The company has been working with REIN, a Canadian real estate investment firm, since the spring. "REIN wanted to digitally connect its membership of real estate investors with each other to share investment opportunities. Currently that is done in person at events," Rossiter stated.

Initially, RESAAS worked with REIN to see what changes would need to be made to match REIN's needs. Once the spec was complete, "we then engaged with REIN's parent company, LEGACY, to actually do the work our spec defined," explained Rossiter. On January 10, RESAAS announced an agreement with LEGACY to customize its platform to fit REIN's needs.

"We have had a tremendous response from our members about our plans to digitize some of the very core fundamentals we provide," said Jean-Guy Francouer, Chief Growth Officer at LEGACY Council of Canada. "Proptech (property technology) will push real estate businesses to the next level, through growth using real estate tools, artificial intelligence, technology and apps."

"The value we provide our members will be tremendous, as the basis for the technology is built from RESAAS' award-winning technology platform that already has an enterprise value of approximately $25 million. By extending it for our own specific needs, we will have a best-in-class solution for our members," he added.

Analysis by Industry Observers

Siddharth Rajeev, an analyst with Fundamental Research Corp., wrote in a report on January 7, "RESAAS Services Inc. has made significant changes to its board of directors and appointed a new chief financial officer; the company has also developed RESAAS Pay, a referral payment processing platform. It has also entered into a joint venture with a San Francisco-based blockchain company, signed an agreement with a 6,000-agent network and increased usage of its RealTimeMLS platform significantly in 2018."

"RESAAS will charge a transaction fee on each referral payment processed by the company, opening up a major revenue stream," Rajeev noted. "With the company reporting RealTimeMLS membership increasing over 50% during 2017, it is clear that the company's platform is gaining popularity amongst real estate agents. As a real estate B2B SAAS company, increasing subscribership is a defining growth metric for RESAAS, and we see their continued growth as a bullish sign for the company's growth prospects," he added.

Fundamental Research Corp. has a Buy rating on RESAAS and estimates the fair value per share at US$0.67. With 53 million shares outstanding, that infers a value of US$35 million. Currently RESAAS shares are trading at around CA$0.24 on the TSX Venture Exchange, giving it a market cap of CA$12.7 million or around US$9.6 million.

Nick Hodge told Streetwise Report, "As an investor, I like that RESAAS has multiple revenue streams. It has transaction fees, premium app revenue, fees from facilitating transactions and data sales. And then you have the blue sky of the blockchain should some of the big real estate companies that it's already partnered with choose to host their transactions with RESAAS software."

"As RESAAS increases conversions to the premium version of the app, and it starts facilitating real estate transactions on the blockchain and taking a percentage fee from real estate transactions, I think we could see the company get to a $100 million valuation in three years," Hodge calculated.

Technical analyst Clive Maund has also been watching RESAAS. He wrote on CliveMaund.com on January 21, "I want to draw your attention to a stock that looks like it is shaping up for a major bull market. It's very cheap here, having dropped from a high at C$5.00 early in 2014 to the current 34 cents. A fine Double Bottom has formed over the past 6 months with a dramatic buildup in upside volume that is driving volume indicators strongly higher and it is viewed as an immediate buy here after its reaction back of the past week or so, with an awareness that in adverse market conditions it could drift back some more."

On February 25, Maund wrote, "the big upside volume kicking in late last week is a sign that it [RESAAS shares] about to break higher again—and this is a stock that tends to rally a lot faster than it drops. This is therefore a good point to add to positions or make fresh purchases."

Here is how one real estate industry insider summed it up: "Disruption is on-going in the deeply entrenched RE industry. RESAAS is a partner to progressive MLSs who want to keep their organizations thriving and innovating. RESAAS is a company that will help an MLS build tools to modernize and adapt. You might call it 'disruption from the inside,'" stated Jay Pepper-Marten, director of MLS and IT for the San Francisco Association of REALTORS.

If you are a licensed real estate agent or broker, you can sign up to RESAAS today here.

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Disclosure:
1) Patrice Fusillo compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an employee. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: RESAAS Services. Click here for important disclosures about sponsor fees. An affiliate of Streetwise Reports is conducting a digital media marketing campaign for this article on behalf of RESAAS Services. Please click here for more information.
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Additional disclosures:
Nick Hodge of Nick's Notebook owns shares of RESAAS.
Clive Maund does not own shares of RESAAS.
Fundamental Research Corp.: The Analyst and FRC do not own shares of the subject company. Fees were paid by RSS to FRC. The purpose of the fee is to subsidize the high costs of research and monitoring. FRC takes steps to ensure independence including setting fees in advance and utilizing analysts who must abide by CFA Institute Code of Ethics and Standards of Professional Conduct. Additionally, analysts may not trade in any security under coverage. Our full editorial control of all research, timing of release of the reports, and release of liability for negative reports are protected contractually. To further ensure independence, RSS has agreed to a minimum coverage term including an initial report and three updates. Coverage cannot be unilaterally terminated.




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