UPDATE: Bank of America Initiates Coverage on Re/Max Holdings on Positive Outlook

In a report published Monday, Bank of America analyst David Ridley-Lane initiated coverage on Re/Max Holdings RMAX with a Buy rating and $33.00 price target. In the report, Bank of America noted, “Re/Max is the franchisor of 6,380 real estate brokerage offices. The ongoing US housing recovery, combined with Re/Max's franchise model should yield strong operating leverage. We initiate with a Buy. We base our $33 price objective on 13x our 2015 recurring EBITDA estimate of $94mn. Our target multiple reflects Re/Max's cyclically depressed EBITDA and franchise business model. Per-agent fixed fees drive the majority of Re/Max's revenue and EBITDA. We forecast Re/Max's agent count to increase 4.7% in 2013, 7.7% in 2014, and 5.7% in 2015. The company's franchise business model should deliver strong incremental margins on revenue growth. We forecast a 62% incremental EBITDA margin (2012-2015E) compared to TTM adjusted EBITDA margin of 48.8%. These assumptions drive our forecast for adjusted EBITDA to grow at a 12% CAGR (2012-2015E).” Re/Max Holdings closed on Friday at $29.06.