In today’s daily we have covered stock research on REA Group (EXPENSIVE). 











Five Dividend Stocks To Buy



 
The S&P 500 was up by 13.76points or 0.71% on Friday to 1964.58 points. U.S. stocks closed out their best week in nearly two years on Friday, helped by earnings from Microsoft and Procter & Gamble and as concerns eased over the possible spread of Ebola in the United States. News of the first case of Ebola diagnosed in New York City hit futures late on Thursday, but the markets shook off those concerns on Friday.

Shares of Microsoft rose 2.5 percent to $46.13, after the company reported higher-than-expected quarterly revenue while keeping profit margins largely intact. Fellow Dow component Procter & Gamble gained 2.3 percent to $85.16. The world's largest household products maker said it would split off its Duracell battery business into a separate company. On the downside, Amazon plunged 8.3 percent to $287.06 and was the biggest drag on both the S&P 500 and Nasdaq 100 after the online retailer's sales projections for the crucial holiday quarter disappointed Wall Street and third-quarter results missed forecasts.




Microsoft Daily Chart (Source – Thomson Reuters)
S&P ASX 200was up by29.1points or 0.54%on Friday and closed at 5412.20 points. The big four banks did the most to lift the index over the week, all rising ahead of bank reporting season. National Australia Bank rose 3.4 per cent to $34.27, Australia and New Zealand Banking Group lifted 3.4 per cent to $33.02, and Westpac Banking Corporation also gained 3.4 per cent to $34.21. Resources giant BHP Billiton ended the week 1 per cent higher at $33.74. On Wednesday its US oil and gas division smashed forecasts to show a 49 % surge in quarterly production. 

Iron ore was up 0.24 per cent to $US80.48 at the close on Friday.  The Australian dollar was trading at US87.96¢ at about 7am AEDT on Saturday, little changed from Friday’s local close of US87.65¢. SPI futures were 18 points higher at 5422 on Saturday morning.  Over the past week, the benchmark S&P/ASX 200 Index and the broader All Ordinaries Index each lifted 2.7 per cent, to 5412.2 points and 5399.3 points respectively. The following stocks will trade ex-dividend today: Countplus Limited, Katana Capital.

 

BHP Daily Chart (Source – Thomson Reuters)
 
Top Performers on the ASX 200 were :-


 
 Stocks of the Day – REA Group (Expensive)
REA Group Limited intends to acquire a 20% stake in Move Inc. with the remaining 80% held by News Corporation. Move is third most viewed website in the U.S for real estate listings. News Corporation will pay USD 950 million for a company which generated earnings before interest, tax, depreciation and amortization or EBITDA of only USD 29 million in 2013. This is a hefty 33 times multiple to pay for a company holding the number three market position.



REA EBITDA (Source - Company Reports)

News Corporation views an opportunity to leverage its news platform and utilize the expertise of REA group to take market share from competitors Zillow and Trulia. Move owns and operates the website relator.com. In 2011, the top four most popular U.S real estate websites were Yahoo (7%), Realtor.com (6.8%), Zillow (6.8%) and Trulia.Com (5.6%). During the past three years Zillow and Trulia which Zillow is currently in the process of purchasing have grown in popularity. 



REA Earnings Per Share (Source - Company Reports)

The strong growth momentum achieved by Zillow indicates to us a growing network to capture the largest audience of home buyers and sellers. REA Group has consistently demonstrated the importance of market share dominance and associated network effect in defending and exploiting its market position to derive strong returns on capital. In our view REA Group and News Corporation will have a difficult uphill struggle to defend and grow the audience reach of Realtor.com against the incumbent Zillow.



REA Daily Chart (Source - Thomson Reuters)

While REA is an online leader in real estate with strong growth prospects, we believe these prospects are fully priced and we see execution risk that is heightened by the change in management and new market based pricing model. We are also concerned that as the proportion of mobile searches grows it will be tougher for REA to deliver yield growth via depth penetration given a basic listing essentially looks the same as a depth listing in the map view. We believe the stock is expensive at the current price and would review the stock at a later date.

 
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