REA Group Ltd (ASX: REA)

REA Details

Some exciting developments: Online property business group, REA has once again charged high with its positive results for year to date as reported by News Corp. The News Corp report includes US GAAP financial information for REA Group and its subsidiaries for the three and nine months ended 31 March 2018. Group financial highlights from core operations for the nine months ending 31 March 2018 include revenue growth of 20% to $592 million and EBITDA growth from core operations of 21% to $345 million. Particularly, strength 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, has helped boost the performance.

The financial services segment, which was launched in the first half, remained on track to deliver the previous FY18 revenue guidance of between $26 million - $30 million and EBITDA between $7 million - $11 million. The Asia segment continues to grow audience share across the region with increases in app and site visits as well as the unique audience. This has also extended the Group’s leadership positions in both Malaysia and Indonesia. REA Group has seen some exciting developments in the quarter, including a rapidly growing portfolio of original content. In the 12 months since launch, the Lifestyle experience has become Australia’s leading publisher of original property-related video and digital content, housing more than 11.5 million minutes of video and over 1,600 articles.

The key thing to note is the consistent momentum that was maintained in three months and nine months in terms of revenue and earnings growth.


Financial results from core operations for three and nine months (Source: Company Reports)

Extension of Australian business: On 1 May 2018, REA announced that realestate.com.au Pty Ltd entered into an agreement to acquire 100% of Hometrack Australia Pty Ltd (“Hometrack Australia”) subject to ACCC approval. Hometrack Australia is a provider of property data services to the financial sector. The purchase consideration of $130 million will be funded from existing cash reserves and debt of $70 million. The recent acquisition of Hometrack Australia is a natural extension for its Australian business. It means the Group will be able to provide its customers and consumers access to more property data with more accuracy than ever before.

The combination of consumer innovation and creating the best and most personalised property experiences is what it makes the number one place for property.More than a quarter of a million Australians have created a financial profile on realestate.com.au. They are highly engaged and demonstrate strong intent and the Group is looking forward to helping them to purchase their homes. The stock price has charged high by 10.9 per cent since the start of the year and by 8.4 per cent in last one month. The stock climbed up by 5.2 per cent as on 11 May 2018. By looking at the overall growth, we believe that there is still a room for upside momentum. We give a “Hold” recommendation at the current market price of $88.71, given the run-up and future potential while changing landscape in property sector is to be watched out for.

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