REA Group
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Solid Financial Performance: REA Group Limited (ASX: REA) reported a 20% yoy increase in revenues to $522.9 million for the fiscal year ended on 2015 driven by increase across all of its segments, while the EBITDA rose 27% yoy $285.8 million. Accordingly, the EBITDA margins improved to 55%, as compared to 51% in last year. Net Profit increased by 24% yoy to $185.4 million, while the EPS reached to $140.6 million in fiscal year of 2015, against $113.7 million in FY14. REA Group also improved its final dividend by 16% yoy and declared 40.5 cents per share for the year against earlier year, In fact the total dividends rose 23% yoy to 70 cents per share during the year.
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Improving operational efficiency (Source: Company Reports)
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Focusing on International Market:REA European operations witnessed 6% yoy revenue increase to $45.6 million, while its European sites average monthly visits improved by 7% yoy to 10.6 million. The group invested to enhance its brand awareness and market share for casa.it, the Italian property market site and accordingly the site’s agent numbers rose as well as improved listing volumes by 20% this year. Moreover, REA group’s focus on operational efficiency also paid off, as its European Segment’s EBITDA surged by 85% yoy to $9.7 million. Asia also remain a major target area for REA as the region has 36% higher opportunity as compared to the Australian market. The group’s Asian site myfun.com was already able to get average monthly visits of 73 thousand for the current fiscal year, post its launch last year. REA was making strategy investments in Asia, and had recently improved its stake in iProperty Group to 21.33%. Move Inc, (in which REA has 20% stake) site visits rose by 52% yoy to 34 million unique users as at June 2015. As per the group’s core Australian segment, revenue increased by 21% yoy to $472.8 million in FY15, as the firm’s premium listing products and the new market based pricing drove its residential business. On other hand, the property listing volumes have decreased by 4% for its Australian business
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Growing traction in the international market (Source: Company Reports)
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Market Leader:REA’s Australian site realestate.com.au is clear market leader with 92.8% of all residential property listings nationwide, way above as compared to its nearest competitor which got 67.3%. Moreover, the average monthly visits to its site has been 24.3 million higher per month as compared to its immediate competitor. Audience are engaged 5.7 times more on the site as compared to the average minutes per month.
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More Potential Upside: REA Group shares have corrected over 17.3% in the month of May as the group reported a lower than expected nine months ending 2015 results. On the other hand, we believe that the Investors have been extremely bullish on the stock and a slightly disappointing results have led to the correction. The stock has been bullish since June and delivered a returns of 7.5% till date (as of Aug 25) even though the broader S&P/ASX 200 index have declined by 11.1%. The full year 2015 results have been encouraging, and the group’s focus on international expansion and operational efficiency would help the stock to move higher in the coming months. Accordingly, we recommend a “BUY” on REA group at the current price of $41.07
SEEK Limited
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Better than expected FY15 results: SEEK Limited (ASX: SEK) fiscal year of 2015 revenues rose 20% yoy to $858.4 million. The group’simproved Australia and New Zealand online employment businesses, Premium Talent Search promotion, integration of JobsDB and JobStreet to Zhaopin in China have contributed to the overall revenue increase. SEk’s efforts of investment in product and technology have also paid off during the year. Subsequently, EBITDA witnessed a 15% yoy increase to $348.9 million, while NPAT surged 6% yoy to $189.8 million during the year. Seek’s cash flows improved to $398.3 million in FY15, against $314.7 million in pcp. Accordingly, SEEK increased its dividends by 20% yoy to 36 center per share for the fiscal year.
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Market Leadership: SEK continues to maintain its market leadership position in Australia, with 32% of placements and a lead of 10x higher as compared to its nearest competitor. The total visits in Australia witnessed a CAGR increase of 22% to 35+million in FY15, from FY12. Mobile visits performed even better showing a CAGR of 47% during FY12 to FY15. Meanwhile, Zhaopin now has a solid market penetration in China, post the integration of JobsDB and JobStreet. SEEK owns market leaders in Brazil and Mexico that are achieving robust financial results whilst evolving their product and service offering.
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SEK’s international presence (Source: Company Reports)
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Attractive valuation: SEK stock delivered 648% returns since its IPO as compared to 109% returns from the broader ASX 200. Despite solid 2015 fiscal year results, SEK’s conservative FY16 guidance have disappointed the investors, due to which the stock fell over 6.6% in last five days alone. The group expects a revenue growth in 15% to 18% range while EBITDA is estimated to grow in the range of 5% to 8%. Meanwhile, with the recent correction of over 27% in the last three months the group is trading at a relatively cheaper valuation P/E of 15.06x as compared to its peers opening an attractive buying opportunity for investors seeking for high value stocks. We recommenda a buy on the stock at the current price of $12.00.
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