SEEK Limited

Impairment Charges, FY18 results expected to be at top end of guidance range and FY19 outlook:SEEK Limited (ASX: SEK) stock has fallen 1.77% in three months as on August 06, 2018. The company for FY 18 will recognize the net impact of three key significant items of A$142m, including the non-cash impairment charge against the carrying value of Brasil Online with the impairment charge of  A$119m and OCC with impairment charge of A$59m. Further, for FY 18, SEK will also recognize non-cash fair value gain of A$36m on investment in Maimai. Moreover, SEK announced preliminary unaudited FY18 results at the top end of prior guidance. As per new guidance, for FY 18, SEK expects revenue growth of 24%, EBITDA to grow at 15% and reported NPAT is expected to be of A$230m before deducting investments in early stage growth options of A$30m. Additionally, for FY 19, SEK expects revenue growth in the range of 16 to 20%, EBITDA growth is expected in the range of 5% to 8% only and reported NPAT (including cost of investments in ESVs) is expected to remain broadly similar to FY18 reported NPAT. On the other hand, SEK stock is trading at a P/E of 19.46x. Based on the foregoing and present geopolitical situation with lack of many growth factors, we give an “Expensive” recommendation on the stock at the current price of $20.09.
 

Preliminary unaudited FY18 results (Source: Company Reports)
 

REA Group Limited

Acquired Hometrack:REA Group Limited (ASX: REA), is engaged in a multinational digital advertising business specializing in property space. The stock has fallen 0.42% in three months as on August 06, 2018. The company’s realestate.com.au Pty Ltd has successfully completed the acquisition of 100% of Hometrack Pty Ltd, effective from 1 June 2018. The purchase consideration of the acquisition was $130m, which was expected to be funded from existing cash reserves and debt of $70m.On the other hand, REA for the third quarter 2018 has reported 19% growth in the revenue & EBITDA. In the first nine months of 2018, the revenue grew by 20% to $592m and EBITDA growth from core operations grew by 21% to $345m. The growth is driven by the strong performance of the company’s residential and commercial businesses and the inclusion of the financial services business, which was not included in the prior comparative period. The growth achieved during the third quarter is good though the listing volumes in Australia were lower due to the timing of Easter and project launches continuing to be lower than the prior corresponding period. This had resulted in modest growth in the company’s business. Moreover, financial services segment, that was launched in the first half, reaffirmed the FY 18 guidance and expects to deliver the revenue in the range of between $26m - $30m and EBITDA between $7m - $11m. Based on the foregoing, we give a “Hold” recommendation on the stock at the current price of $ 81.080 ahead of full year result due on August 10, 2018.

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