Domain Holdings Australia Limited
DHG Details
DHG to Acquire Leading Campaign Management Technology Platform: Domain Holdings Australia Limited (ASX: DHG) hold a portfolio in the property market and provides property technology and services. Its portfolio includes Domain, Allhomes, Commercial Real Estate, Australian Property Monitors, Domain Review, Pricefinder, Domain Home Loans and Domain Insure. As per 4th April 2022 announcement, its Institutional Entitlement Offer got completed and raised ~$162 million. The equity was raised to acquire 100% of Realbase Pty Ltd for A$180 million plus contingent consideration of up to A$50 million.
1HFY22 Summary: During the half-year, DHG closed its accounts with $52.58 million of cash at bank.
Financial Summary (Source: Analysis by Kalkine Group)
Key Risks: The company’s operational and financial performance could be affected by the rising market share of its peers. In addition, it is exposed to the ever-changing technology environment, failure of upgradation might affect its business.
Outlook: The company is looking forward for the Realbase Pty Ltd acquisition, which will increase the DHG’s market coverage by ~35% to ~50%. Both the company hold complementary products and distinct strengths in different geographical areas and agent partners. This will bring synergy benefits. The expected acquisition is expected to double the Domain’s Agent Solutions’ revenue for FY22F, on a pro forma basis.
Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative)
Source: Analysis by Kalkine Group
*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.
Stock Recommendation: Over the last six months, the stock has corrected by 29.08% and is trading lower than the average 52-week price level band of $3.665 - $6.006, offering a decent opportunity for accumulation. The stock has been valued using the P/E multiple based illustrative relative valuation method and arrived at a target price with an upside of low double-digit (in % terms). The company might trade at a slight discount to its peers, considering the decreasing current ratio and increasing debt-to-equity ratio. For this purpose, peers like REA Group Ltd (ASX: REA), Seek Ltd (ASX: SEK), and others have been considered. Given the company’s track record of rewarding shareholders through dividends, decent increasing revenue profile, growing NPAT, anticipated synergies from acquisition, current trading level, upside in valuation and key risks related with the business, we give a “Speculative Buy’ recommendation on the stock at the closing market price of $3.850, down by ~2.036% as of 7 April 2022.
Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.
DHG Daily Technical Chart, Data Source: REFINITIV
Note 1: The reference data in this report has been partly sourced from REFINITIV.
Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.
Technical Indicators Defined:
Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.
Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.
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