Domain Holdings Australia Limited

DHG Details

Key Takeaways from Macquarie Conference Presentation: Domain Holdings Australia Limited (ASX: DHG) is a real estate media and technology services business focused on the Australian property market. Recently, the company, via a release announced that it will conduct its Annual General Meeting on 11^th November 2019. Additionally, the company added that it will also release its full year 2019 results on 16^th August 2019. As per the release dated 31^st May 2019, the company announced the entry into binding documentation with its joint venture partner, TW Australia Holdings 2 Pty Ltd for Domain to divest its 50% interest in utilities comparison and connection service Compare & Connect for an amount of $6 Mn. The company with the help of a release dated 28^th June 2019 announced that it has wrapped up the sale of its 50% interest in utilities comparison and connection service Compare & Connect to its joint venture partner TW Australia Holdings 2 Pty Ltd.  

The company in its Macquarie Conference Presentation outlined trading for the March 2019 quarter. The digital revenue of the company was in accordance with the previous corresponding period and total revenue witnessed a fall of approximately 6%.The total new market listings witnessed a fall nationally with fall in auction volumes of 30% and 36% in Sydney and Melbourne, respectively for the March 2019 quarter.

The company continued to deliver double-digit growth in Residential Digital yield, broadlyconsistent with 1H FY19 and offset by the impact of 13% fall in the company’s residential sale listings. The organisational structure of the company enables more effective coordination of product, content & audience, go-to-market, and sales activities. The cost efficiency measures of the company are primarily supporting targeted reinvestment in growth initiatives. However, its salesforce effectiveness improvement initiatives are primarily delivering greater customer value through data and insight. The following picture provides an idea of segments results of the company for 1H FY19:


Segment Results (Source: Company Reports)

What to Expect:The company stated that the first 6 weeks of 2H FY19 witnessed continued growth in yield and lower listings volumes in a seasonally low listings period. For FY19, the company is anticipating underlying costs to be slightly lower in comparison to proforma FY18. It anticipates total costs to rise mid-single digit as compared to proforma FY18. The company continued investment in growth initiatives, which are being supported by continuing cost discipline.

Stock Recommendation:  The company delivered an asset to equity ratio of 1.32x in 1H FY19 as compared to 1.25x in 1H FY18. The debt to equity ratio of the company stood at 0.16x in 1H FY19 against 0.12x in 1H FY18.  The current ratio of the company stood at 1.73x in 1H FY19, reflecting YoY growth of 3.6%. Coming to the stock’s past performance, it produced returns of -8.44% and -6.93% in the time span of one month and three months, respectively. It reported a higher EV/Sales and EV/EBITDA on NTM basis (next twelve months) of 4.8x and 15.5x respectively against the industry median of 3.5x and 8.5x respectively indicating the stock to be overvalued. Currently, the stock is trading towards its 52-week high level of $3.640. Hence, we are of the view that most of the developments are priced in at the current juncture.

Hence, considering the stretched valuations and current trading levels, we advise the investors to wait and watch the stock at the current market price of A$2.780 per share (down 1.418% on 8^th Aug 2019), ahead of its full-year results which are to be released on 16 August 2019.


DHG Daily Technical Chart (Source: Thomson Reuters)

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