REA Group Limited

REA Group Limited (ASX:REA), online  real  estate classifieds site provider, has successfully completed the acquisition (effective from June 2018) of Hometrack Pty Ltd. The group is diversifying its strength as a complete brand into related markets such as commercial property and businesses for sale; and with international growth, REA expects to reach new heights. As the group aims to reinvest cash flow to remain innovative and retain its dominant market position, EBITDA margins are expected to stay more or less stable while higher revenues can drive operating margins going forward.

FY18 Revenues for the group increased by 20% up to $807.7m with 18% growth up to $43.3m from business operations in Asia. EBITDA was up by 22% to $463.7m in FY18. Net profit recorded 23% growth up to $279.9m during FY18.

Technically, the scrip is trading at the lower ends of the Bollinger bands with expansion at the lower end. The scrip is in a downward move from a long period and is expected to show some bounce and bear phase might halt. Looking at major indicators like relative strength indicators and Moving Average Convergence and Divergence already in negative territory, bearish phase may consolidate going forward.

The stock has a market capitalization of $9.32 Bn, and price-to-earnings ratio of 36.88x. The trading levels and fundamentals indicate for a “Hold” scenario at the current juncture as the stock trades at $70.
 

Afterpay Touch Group Limited

Afterpay Touch Group Limited (ASX:APT)completed fund raising of approximately $117 million to cater to Afterpay’s international expansion strategy. The group has been into expansion through different verticals across Australia, and eyes growth in US with launch planned for UK. Financially, stock posted healthy FY18 results with revenue and other income growth of 390% up to $142m. EBITDA grew by +468% up to $34m excluding significant items. Annualized underlying sales for Q42018 is approximately $3b. Statutory net loss after tax improved from $9.6m in FY17 to about $9.0m in FY18 despite a significant increase in D&A (non-cash) and share-based payment expenses (non-cash).

Technically, the scrip is in downtrend mode from August and is making lower lows on the charts with no reversal pattern indication. The scrip is currently trading below the mean deviation of the bollinger bands with wicks of bear candle representing rejection on upside move. Major indicators still point towards downside trend.

The stock has a market capitalization of $2.82 Bn, as of October 25, 2018, and exhibits an avoid scenario at the current juncture. We, therefore, give a “Sell” recommendation on the stock at the current market price of $11.72.
 
  

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