Bronte Media

Move turned in another ho-hum quarter, where revenues declined by 3%, and investors responded by driving the valuation of the company to its rough cash value.

The company’s main business, selling real estate advertising is doing OK and is in an enviable market leading position but:

- The Welcome Wagon business hangs around like a bad smell and continues to deteriorate: In the third quarter it had an operating loss of over $3m, the company has not found a buyer in nearly a year and it wrote down the carrying value of the business to $0.

- The company had most of its cash in auction rate securities: $129m to be precise. In response it now has a short term loan of $65m secured against the auction rate securities that it has drawn down upon.

At a closing price of $1.37 today, the company is valued at roughly $210m.

Continuing operations are running at roughly break even but Welcome Wagon is burning cash.

The company has $114m in cash plus $121m in auction rate securities (company’s fair value of the $129m of actual securities it holds). If we net out the $65m borrowings, the company has a net cash position of $170m

That leaves roughly $40m left to value the continuing operations, which include the market leading site, with complete coverage of listings and a freshness of updates that no other site can rival.

In essence, the market is saying that MOVE is worth less than Trulia and Zillow. Even though Hitwise says Realtor.com gets roughly five times as many page views as Yahoo Real Estate and Zillow, the number two and three according to their rankings, and twelve times as many as Trulia.

I first wrote about MOVE being a bargain when it was at $2.60 in December of last year, so I have clearly been wrong. The real estate market is not turning around soon and there will be continued pain as a broader recession hits even hard but $40m for the leading real estate site in the US?