IPO of CorpHousing Group: Convenient Rental Service
When travelling, we often face the problem of finding a good place to stay. Hotels aren’t always comfortable and the service quality leaves much to be desired. In such cases, different short-term rental services may be of great help and assist tourists to find cheaper accommodation much faster.
In today’s article, we’ll take a closer look at CorpHousing Group, Inc., the company that provides intermediary services for short-term rental of detached houses and mansions in American cities. The company is planning to go public by listing on the NYSE on 11 August under the "CHG" ticker symbol.
CorpHousing Group is a short-term apartment rental operator in big megametropolises in the US. The company has a website and an application with a user-friendly interface. CorpHousing Group is headquartered in Miami, Florida; its CEO is the co-founder, Brian Ferdinand. He holds a majority share, that’s why other shareholders can’t have a significant influence on the company’s operational activities. It might be a serious problem in case the company’s business model requires a restructuring.
CorpHousing owns SoBeNY, a brand which conducts activities in the short-term rental market. The company established a goal to develop a reliable and effective service for searching real estate objects for its clients.
CorpHousing acts as an intermediary between accommodation owners and tourists, and offers the latter all the benefits of holidays and vacations outside the classic hotel industry. The major success criterion is providing both lessors and lessees with safety.
As of the report date, the company managed 490 real estate objects in 9 American cities, and 688 more objects were in the process of commissioning. By the end of 2022, CorpHousing Group is planning to commission at least 3,600 objects in 12 cities.
In addition, CorpHousing is entering the global market this year. At the moment of filing an IPO request, the company’s management was targeting London and Paris. The issuer gets most of its revenue from rental payment commissions.
The company’s target market is segmented enough. Tourists can choose from a wide range of accommodation types: hotels, resorts, hostels, holiday apartments, and others. According to Travel Accommodation Market, a market research report by Allied Market Research (AMR), the global travel accommodation market was estimated at $632.8 billion in 2018. By 2026, it might reach $893 billion.
Consequently, the Compound Annual Growth Rate (CAGR) could be 4.5% from 2019 to 2025.
It's worth noting that the industry incurred heavy losses from global lockdowns during the coronavirus pandemic in 2019. This market hasn’t completely recovered ever since.
The issuer’s key competitors are:
At the time of the IPO, the issuer had not generated any net profit. We will therefore analyse Innovative Eyewear's financial performance with its revenue. The financial data from the S-1 form shows a 137.1% growth in the company’s sales in the three-month period that ended on 31 March 2022 in comparison to the same period of 2021 – meaning up to $11.76 million.
In the 12-month period that ended on 31 March 2022, the issuer’s revenue was $39.02 million. In 2021, the indicator showed $32.22 million, representing a 137.96% growth in comparison to 2020.
In 2021 and 2020, CorpHousing Group was a loss-making company, but it was actively working on mitigating losses. In the three-month period that ended on 31 March 2022, CorpHousing recorded a $1.42 million net profit, while its net loss over the same period of 2021 was $1.31 million.
The issuer’s cash position for the 12-month period that ended on 30 September 2021 was negative, $1.2 million.
As of 30 September 2021, CorpHousing Group’s total liabilities were $13.2 million, while the cash equivalents on its balance sheet were $34.4 million.
The company's strengths are:
- Prospective target market
- Revenue growth rate is over 100% annually
- Expansion to the global market
- Proprietary software for attracting clients
- Net profits
- Qualified management
The list of key weaknesses is much shorter: strong competition, unstable net profits, and a negative cash position.
The underwriters of the IPO are Joseph Gunnar & Co. LLC and Maxim Group LLC. The issuer is planning to sell 4.3 million common shares at the price of $4-5 per share, as well as one warrant. Gross revenue is expected to be almost $30 million, not including conventional options sold by the underwriters.
Assuming the IPO is successful at the proposed price, the issuer's value at the IPO excluding underwriter options might be approximately $639 million.
The Price-to-Sales ratio (P/S ratio) multiplier might skyrocket to 39.94, which is still high above the average value in this industry. For example, the ratio of the issuer’s major competitor is 10.83.
Buying CorpHousing Group shares might be considered a classic venture investment, which involves high risks and is not suitable for all investors.