Freelancer worth 400 million??? Bit of froth there

Been reading in the press about Freelancer, the short term project resourcing site owned by Matt Barrie. Apparently there is talk that he turned down a $400 million dollar offer to sell from a " Japanese recruitment company". Somehow, I find that hard to believe.

Lets look at it from a valuation model. According to the Afr today, the site has turned over $1.2 billion in project costs from 2004. So that is roughly $133 million a year. But the site only sees around 3% of that figure, so revenue per year of the site is actually $4 million a year.

Now if we assume the same Ebitda margin as a comparable site, say carsales.com.au of 56%, that leaves us with an ebitda per year of around $2.2 million.

Now car sales has a market capitalization of around $2.7 billion, so is trading at a multiple of around 22 times ebitda. If we assume the same multiple, that takes us to a valuation of $50 million, a lot smaller than that $400 million figure that was bandied about.

Even if we assume that the site has made $600 million in the last three years, or $200 million a year, we are looking at a valuation of around $75 million.

And that is even before you run the Porters 5 forces framework over it. A site that has basically no barriers of entry, whose entire reason for being will drive down project costs due to competition and hence drive down revenue that will flow to the site doesn't really look like a long term proposition. First mover advantage is really all there is.

The Japanese can be a crazy nation, but when it comes to the dollars, they play it pretty cold. To me, the recent press smells like a beat up to try and raise the price expectation of the impending ipo. I will be very interested to read the prospectus if he valuation is any higher than around $ 100 million. As it would be

But I could be wrong.