REA Group Ltd

REA Details

Long-Term Driver Intact: REA Group Ltd (ASX: REA) has recently posted its robust results for first quarter ended 30 September 2018 wherein revenue after brokers commissions grew by 17% and amounted to $221.9 Mn. It was mainly driven by the Australia residential business and the inclusion of the Hometrack Australia business, which was not in the prior corresponding period (PCP). Moreover, there was also a full quarter contribution from the Smartline business compared to two months in the first quarter last year. EBITDA stood at $130.9 Mn in Q1FY19 against prior year, showing robust growth of 23% on Y-o-Y basis despite the rise of 10% (Y-o-Y) in operating expenses during the period. Moreover, Free cash flow (FCF) has substantially grown by 52% to $52.1 Mn in Q1FY19 over the prior corresponding period and REA is expecting to generate strong cash flows in the upcoming period on the back of strong sales growth underpinned by improving product mix and product innovation such as Audience Maximiser and FrontPage. According to the management, realestate.com.au’s audience lead remains solid, seeing 2.7 times more visits than the nearest competitors over the quarter. Consumers remain highly engaged across all platforms. Additionally, for FY19, the Hometrack Australia business, which was acquired in June 2018, remains on track to achieve revenue guidance of between $14 Mn to $16 Mn and EBITDA guidance in the range of $6 Mn to $7 Mn.


Q1FY19 Financial Highlights (Source: Company Reports)

Meanwhile, the share price has fallen 2.20% in the past three months as at November 09, 2018 and traded at higher PE multiple of 41.95x with the beta of 1.16x as on 5-Year (monthly basis), signalling overvalued position at the current juncture. However, looking beyond the current cycle, we remain positive on REA's long-term prospects as the company is transforming deeply into integrated property hub and increasing footprints in the newer market. Therefore, we maintain our “Hold” recommendation on the stock at the current market price of $78.560, down 2.4% on November 12, 2018.


 
REA Daily Chart (Source: Thomson Reuters)
 

Seek Limited

SEK Details

Decent Performance in FY18:Seek Limited (ASX: SEK) has posted good numbers for the full year 2018 with revenue coming in at $1,294.5 Mn compared to 1,039.7 Mn in FY17. The growth of 25% was registered in revenue which was primarily driven by the strong growth of three key assets, i.e., SEEK ANZ, SEEK Asia and Zhaopin. The total EBITDA for the company came in at $432.8 Mn, an increase of 15% from FY17 number of $375.8 Mn. EBITDA grew less than revenue due to disappointed LatAm result and reinvestment in Zhaopin, SEEK Asia, Online Education Services (OES), and Early Stage Ventures (ESVs) during the year. However, reported NPAT was down by 84% to $53.2 Mn in FY18 while underlying NPAT grew by 4% and amounted to 229.5 Mn. Reported NPAT was mainly impacted by the rise of depreciation & amortization expenses, higher net interest cost, and share-based payments incurred during the period. Besides this, the Group cash flows remained strong and supported total FY2018 dividends of 46 cents. Further, SEK has also witnessed higher revenue growth over the years with 15-year CAGR of ~28%. This sales growth reveals that the company is well placed to grow its long-term value on the back of strategic investment in new products & services which deliver more value and support to expand the new business opportunity in the market.


FY18 Financial Highlights (Source: Company Reports)

Meanwhile, the stock has generated a negative return of 13.84% over the past six months and traded at higher PE multiple of 117.17x. On technical analysis front, Relative Strength Index or RSI has been applied on the daily chart of SEK using the default values. As per the observation, the 14-day RSI has started its rebounding phase. Moving average convergence and divergence indicator (MACD) has crossed the signal line, displaying that at current juncture scrip is good to watch for any catalyst that can lead to breakout levels.Furthermore, we presume that the positive factors have already been discounted in the price presenting a limited upside in the stock at the current juncture. We, therefore, suggest investors that they should keep a close watch on the stock at the current price of $ 17.820 and wait for further growth catalyst.


 
SEK Daily Chart (Source: Thomson Reuters)
 
 
 

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