REA Group Ltd 

Update Related to REA’s Board: REA Group Limited (ASX: REA) had come forward and made an announcement that Mr. Ryan O’Hara would be stepping aside from the company’s board on February 8, 2019. The company also added that Ms. Tracey Fellows would remain on Board of the company and would be representing News Corp. Earlier, the company had made an announcement that it would be declaring the results for half year ended December 31, 2018 on February 8, 2019.

Q1 FY 2019 Important Metrics (Source: Company Reports)

Not so long ago, the company had stated that they have generated revenues amounting to $221.9 million in Q1 FY 2019 which implies the rise of 17% on the YoY basis because of the Australian Residential business as well as inclusion of Hometrack Australia business. Also, the contribution from Smartline business was also witnessed in Q1 FY 2019 (full quarter) while in the same period of previous year there was 2 months contribution.These revenues were after the broker commissions.

REA Group to Be Benefited by Global Footprint: REA Group had stated that Asia happens to occupy a crucial part when it comes to the long-term global strategy of the company.  The company had made investments towards the Asia region.  There are expectations that the company might benefit from its global footprint. Additionally, the company is expected to be aided by its robust margin position. In FY 2018, its net margin stood at 32.8% reflecting the rise of 25.7% on the YoY basis. However, its EBITDA margin rose 1.9% YoY to 59.1%.

Stock Recommendation: On the daily chart of REA, Moving Average Convergence Divergence or MACD has been applied and default values were used for the purposes. After careful observation, it was noticed that the MACD line has crossed the signal line and is trending in the upward direction which reflects the bullish momentum. Therefore, the stock might witness bullish momentum moving forward. By looking at its strong margins and high PE multiple of 39.58x, we maintain our “Hold” recommendation on the stock at the current market price of A$77.940 per share (up 2.62% on 7 February 2019).
 

Stockland

A Look at Recent Update: As per the release dated January 9, 2019, Stockland (ASX: SGP) had stated that total 29,231,131 stapled securities are bought back on-market as well as cancelled since the buy-back had commenced on September 24, 2018. Moreover, in the same release, the company had also stated that 2,405,238,145 stapled securities are on issue following this cancellation. Not so long ago, the company had informed the market players they have exchanged contracts with Frasers Property Australia with regards to the unloading of The Grove residential community in Melbourne for the consideration amounting to $202.5 million. 

The company’s position with respect to the margins have witnessed an improvement over the span of previous 5 years to FY 2018 (FY2014-FY2018).The company’s net margin in FY 2014 was 27.2% while in FY 2018, it was 36.9% which reflects the strength in the company’s bottom-line with respect to top-line.   

What to Expect From SGP: Earlier, Stockland had stated that its portfolio happens to be in strong position when it comes to sustainable long-term growth.  It also added that it has been targeting FFO per security growth between 5-7% for FY 2019 (on the assumption that there would be no material change with regards to market conditions).


FY 2019 Outlook (Source: Company Reports)

Additionally, the company stated that it would be supported by the robust balance sheet as it would allow the company to reap the benefits of the opportunities.

Stock Recommendation: On the daily chart of SGP, Exponential Moving Average or EMA has been applied and default values have been used for the purposes. After the observation, it was noticed that the stock price has crossed the EMA and had trended in the upward direction which reflects that the stock might witness upward momentum moving forward.

Moreover, the company is expected to be benefited by the strong balance sheet. Based on the above-mentioned factors, we maintain our “Hold” rating on the stock at the current market price of A$3.840 per share.   
 

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