Sahibinden: On the Cusp of Becoming Turkey’s First Unicorn

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Sahibinden.com is an online shopping in platform in which people and businesses buy and sell real estate, cars and broad variety of goods and services, headquartered in Istanbul and owned by Aksoy Group. Sahibinden’s e-commerce business relies solely on third-party sales in Turkey, in other words, a model similar to Alibaba is being followed. We’ll covering the details about the company for the remainder of this article, but let’s take a look what see in Turkey’s demographics and how capable it is when it comes to fueling growth in e-commerce business.

Turkey’s Demographics

Turkey Demogprahics and Internet Users

As summarized on the figure above, Turkey’s young and fast-growing population and internet accessibility will be the key driver of the growth and deliver favorable conditions for companies that want to tap into a dynamic market of eager new consumers. Thus, it is not hard to imagine the country in the coming years with half of its population shopping online.

Turkey’s e-commerce business volume is expected to be around $10.2 billion, however, representing only 1.8% of total volume in retail sector. Considering the fact that online shopping accounts for +4% of total business across the emerging markets, Turkey still has a huge room for growth. In 2015 multi-channel online retailing business saw an increase of 45% on annual basis, also building a supportive case for our investment thesis for Sahibinden.

Turkish Online Marketplaces

Turkish ecommerce market is dominated by online marketplaces and multi-category retailers. Turkey some online retail heavyweights whose business include first-party sales (like HepsiBurada, Trendyol, Markafoni) while some others solely rely on third-party sales (like Sahibinden, GittiGidiyor, N11, Letgo). HepsiBurada is a typical multi-category retailer while Trendyol and Markafoni stand for online fashion stores. The distinguished feature of Sahibinden that it is also involved in real-estate and vehicle sales.

Turkish internet companies have received remarkable investments to date. The following is a list of the biggest deals ever made in Turkish tech space.

Turkey Top Web Deals

About Sahibinden

Sahibinden differs from other e-retailers owing to its exposure to intermediary of real property trades. As its name, which means “by owner” in Turkish, suggests that Sahibinden is well-developed positioning in its market. When search engines and social media sites excluded, Sahibinden tops the most popular keywords league table.

Its solid position in property sales over the internet provides significant advantages to Sahibinden. As well known, the core business of online marketplaces is mediating the trade where they charge traders with fees establishing the main source of revenue for themselves. Some other businesses have different streams such as ad sales, real estate listings, motors listings, financing fees, off-platform payment fees etc. These so-called non-marketplace revenues should be expected to be high in Sahibinden given its concentration on property trade.

In a nutshell, Sahibinden is well-positioned business with diversified revenue streams in a fast-growing environment.

Valuation

This is where we feel like we are the end of our rope, since lack of data remains as a pretty straightforward issue for valuing the company. At this stage, we will be applying some peers’ (Ebay, Alibaba and MercadoLibre) data gathered from Statista and the US SEC (Note that shares of all the peers mentioned is traded in Nasdaq, with quotes of EBAY, BABA and MELI, respectively).

There are several metrics to look for when valuing a marketplace, but Gross Merchandise Volume (GMV) appears to be the most important metric. We have gathered data on publicly traded comps (MELI, EBAY) and found the valuation multiple is 0.8x the run rate GMV. However, note that there have been transactions that took the metric up to 2x.

Another important input is that Turkey’s e-commerce represent only 1.6% of total traded which is remarkably low, even compared to the emerging markets, like Brazil, where 3.2% of total shopping is done online. With that being said, e-commerce volume growth in Turkey as almost doubled that of global, which builds a supportive case for a premium valuation.

According to the official statistics, total e-commerce volume is expected to be $10.2 billion in 2016 in Turkey. Sahibinden’s market share is not higher than 5% but remember that Sahibinden’s non-marketplace revenue base is stronger than those of its competitors. So, the market share should not be what is driving the valuation strategy.

Due to similarities between two companies we chose to use MercadoLibre for valuation comparison purposes. Both companies operate in developing economies (MercadoLibre operates in Latin America countries, Argentina and Brazil represent 80% of the revenues) with middle-income populations. We think the valuation would be a function of number of Internet users and nominal GDP per capita. MercadoLibre operates in a region with number of internet users of 340 million whose income averages $6.900 per annum while 40 million users averagely earn $8.700 in Turkey. Given MercadosLibre’s average stock market valuation of $5.8 billion last year, Sahibinden could worth $860 million.

One critical point is that MercodoLibre generated a GMV of $7.1 billion last year, which means that the company is valued at 0.8 times GMV. Our estimated worth for Sahibinden would possible signal a considerably premium valuation on this multiple, which is, in our view, justified given Turkey’s e-commerce business’ potential growth. Also, increasing risk appetite in global funding market could lead a significant markup for Sahibinden, and then, we might able to see it among so-called unicorns, a term being used for tech companies whose valuation exceed $1 billion. Though there is not enough data making it hard to fully assess, Turkey’s strong demographic profile and its strong positive relative to other prominent e-commerce companies make Sahibinden a good play for venture capitalists looking for multi-million investments in emerging markets.

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