Two on-line advertising stocks with long-term potential

REA Group Limited

REA Details
Expanding international penetration while maintaining market leadership in Australia: REA Group Limited (ASX: REA) stock fell over 12.56% in the last three months (as of October 10, 2016) due to concerns of rising competition coupled with lower July listings which fell by 11% against the prior corresponding period. On the other hand, the group’s site in Australia, realestate.com.au has a market share of 94% which is 17% more as compared to its nearest competitor. REA generated an Average monthly visits’ growth by 20% and is 2.1x higher per month as compared to its immediate competitor, based on Nielsen Online Ratings (43.8 million vs 20.5 million average monthly visits). This indicates the clear market leadership of REA in Australia.

Fiscal year of 2016 overall performance (Source: Company Reports)
 
REA’s international growth is also ongoing, wherein it’s overall European Sites’ Average monthly visits achieved 15% growth to 12.2 million in fiscal year of 2016. The group’s Asian business has iProperty and its Chinese listing site, myfun.com, contributed $23.9 million of revenue for the year. After investing in Move during November 2014, the group’s visits enhanced by 17% year on year (yoy) to 53 million in the United states. We give a “Hold” recommendation on the stock at the current price of $54.55

 
REA Daily Chart (Source: Thomson Reuters) 

Seek Limited

SEK Details
Positioning SEEK Learning business: Seek Limited (ASX: SEK) reported that they have been supporting as well as aware of the changes in the education sector since the last twelve to eighteen months. Minister of Education and Training recently announced for a new VET student loans program with a reference to prohibiting approved providers from using brokers, and the group said that they would check to assess the impact on their SEEK Learning segment (if falling under the definition of a ‘broker’). The group believes that their SEEK Learning would play a major role in offering career and course advice to students and jobseekers, and the segment is currently in a transition period. SEEK Learning otherwise represented only 4% of revenue and 1% of EBITDA (FY 2016) for the group. 

Segment-wise performance (Source: Company Reports)
 
Meanwhile, SEK came out with more than the estimated performance for FY16 wherein its underlying NPAT reached A$198.1 million exceeding their NPAT guidance. Australia and New Zealand Employment Revenue and EBITDA, each surged by 15% while International revenue rose 18%. Seek is constantly making investments to expand its market opportunity. SEK stock rallied over 3.46% this year to date (as of October 10, 2016). We give a “Hold” recommendation on this dividend yield stock at the current price of $15.46

 
SEK Daily Chart (Source: Thomson Reuters)

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