S&P 500 was down 0.13 % to 1845.12 overnight, fluctuating near a record after data showed slower growth in home prices and a drop in consumer confidence. West Texas Intermediate crude fell on concern that the weakening Chinese yuan will hurt growth in the second-biggest oil-consuming country and on projections that U.S. supply rose last week. Brent also dropped. The S&P/Case-Shiller 20-city home price index rose a seasonally adjusted 0.8 percent in December, down from a 0.9 percent rise in November. For the 12 months to December, prices were up 13.4 percent, below the peak of 13.7 percent in November and the first decline in the rate of change since June.

Recent data have shown the housing recovery losing steam in the early part of the year. Housing starts dropped 16 percent in January, the biggest decline in almost three years, and home resales slid to a 1-1/2 year low last month.


S&P Daily Chart (Thomson Reuters)

S&P ASX 200 was down 6.4points and closed at 5433.8 points. Daiwa Securities Group of Japan signed a memorandum of understanding (MOU) with Australia and New Zealand Banking Group Ltd on Feb. 24, for business alliance in merger & acquisition (M&A) advisory area.

Iron ore has fallen below the level of $US 120 a tonne for the first time since July last year raising fears that the bulk commodity could face further drops.China now accounts fror almost half of the wrld steel production. Its mills hunger for iron ore, a key steelmaking ingredient determines the strenght of the Australian Dollar. Liquidity problems have started to bite Chinese mills after years of breakneck expansion. Some private mills in Tangshan, home to about a quarter of China’s steel capacity are empty and silent after owners ran out of cash to pay their workers. Last week Andrew Mackenzie (BHP CEO) said the price of steelmaking ingredient would decline this year as rising supply moves the seaborne market into surplus.


ASX 200 Daily Chart (Source – Thomson Reuters)
 
 
 
 
The top gainers on ASX 200 were:-

Code	Name	Price	Change	%   Change
RHC	RAMSAY HEALTH CARE LIMITED	$47.54	$2.98	6.69%
CAB	CABCHARGE AUSTRALIA LIMITED	$4.27	$0.24	5.96%
NST	NORTHERN STAR RESOURCES LTD	$1.27	$0.07	5.83%
QBE	QBE INSURANCE GROUP LIMITED	$12.27	$0.62	5.32%
PDN	PALADIN ENERGY LTD	$0.45	$0.02	4.71%

 
 
Stock of the Day – REA Group (REA)
REA Group Limited is engaged in the real estate online advertising and related services. Its online advertising services include online advertising of residential properties for sale and rent (realestate.com.au); online advertising of commercial properties for sale and lease (realcommercial.com.au); provision of online display advertising space for advertisers in various industries; provision of Website development services to the real estate industry through Web design services; provision of property market related information to customers and consumers including publications to advertise properties for sale and rent; and other services.

Source – Realestate.com.au

REA is younger in the structural migration story than its Australian online peers (SEEK, carsales.com.au), which is attractive because it means more years of stronger revenue growth ahead of it. We estimate that real estate ad spend in Australia has only 50% online vs Employment classifieds at 80% for SEK and Auto classifieds at 70% for CRZ. Thus we see more years of positive revenue growth ahead for online real estate as more real estate ad spend /marketing moves out of print and into online. In contrast in both employment and Auto we estimate the inventory migration story is more mature.

The Australian real estate industry structure is stable with REA and its major shareholder News Corp Australia are the No.1 players in total real estate advertising in Australia, While Fairfax’s Domain are the clear No.2. At this stage there are no new players or technologies on the horizon and thus we believe REA has a stronger competitive position and therefore stronger pricing power than peers CRZ and SEK.


REA Daily Chart

With 30% group revenue growth, 38% EBITDA growth. We expect this will be amongst the strongest organic growth this reporting season and further reinforces REA’s position as one of the market’s preeminent growth companies. Good operating leverage again apparent with EBITDA margins now 51% up from 48% in the previous corresponding period despite an increase in corporate costs and investment in offshore markets. We like the REA story but find it too expensive at the current price and would review it again at a later date.

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Kalkine provides general advice on securities. Kalkine does not provide advice that takes into account your, or anybody else’s investment objectives, financial situation or needs. We strongly suggest that you should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. Employees and/or associates of Kalkine Pty Ltd may hold one or more of the stocks reviewed on this website. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd currently hold positions in:  BHP, BKY, KCN, PDN, and RIO. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.
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