Section 1: Company Overview and Fundamentals

1.1 Company Overview:

Domain Holdings Australia Limited (ASX: DHG) is an advertising and marketing company that focuses on portfolios of property brands. The company provides property search and listing, data, and agent and consumer solutions for a group of customers and their property decisions.

1.2 The Key Positives, Negatives, Investment Highlights, and Risks

1.3 Top 10 Shareholders: The top 10 shareholders together form ~70.22% of the total shareholding. Fairfax Media Ltd and Fairfax SPV No.1 Pty. Ltd. hold a maximum stake in the company at ~45.30% and ~14.76%, respectively.

1.4 Key Metrics: During FY22, the company reported a gross margin of 92.5%, which increased from 92.3% in FY21. The debt-to-equity ratio in FY22 improved to 0.22x compared to 0.23x in FY21. Below is captured the trend of EBITDA margin and asset turnover ratio:

Section 2: Business Updates, Financial and Operational Highlights

2.1 Recent Updates:

2.2 Insights of FY22: During FY22, DHG witnessed a rise in EBITDA to AUD 122.1mn in FY22 compared to AUD 100.6mn in FY21. The company invested AUD 20.9mn in property plans & equipment (PPP), and software in FY22 increased by AUD 3.2mn from FY21. Further, DHG paid a dividend of AUD 39.3mn in FY22, leading to the resumption of dividends post-COVID.

2.3 Business Strategy: The results of Domain's transformation provides confidence to the company to continue with its marketplace strategy while holding on to a disciplined investment approach. DHG planned targeted investments that accelerated growth across micro markets, agent solutions, and other marketplace solutions.

Section 3: Key Risks and Outlook:

Section 4: Stock Recommendation Summary

4.1 Price Performance and Technical Summary:

4.2 Fundamental Valuation

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is September 9, 2022. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above. 

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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