Last week only the market was updated by Fairfax Media (ASX: FXJ) about shareholders’overwhelming response in favour of the spin-off of profitable real estate listing business, Domain from the company. On November 06, 2017, Fairfax updated that the Federal Court of Australia has approved the scheme of arrangement for the separation of Domain Holdings Australia from FXJ. The shareholders at the Scheme Meeting and Annual General Meeting held on November 02, 2017 had approved the separation. The group will be lodging a copy of the orders made by the Federal Court of Australia with the ASIC on November 07, 2017.
 

Timelines (Source: Company Reports)
 
Domain is said to commence trading on ASX on November 16, 2017under the code ‘DHA’, on a deferred settlement basis initially, while the separation will be implemented on November 22, 2017.Fairfax will be retaining 60% of Domain while Fairfax shareholders will be given one Domain share for every 10 Fairfax shares owned. The shareholders will also retain the existing FXJ shares. It is worth noting that Fairfax is said to still have the capability to run the show with its other cash flow drivers. Now, looking at the Domain spin-off, key things to be highlighted include the following -
 

- The ASX listing is expected to provide another option to the investors for exposure toa money-spinning digital real estate advertising space.Domain has a track record of strong total revenue performance, growing at a 3-year CAGR of 28%, and the growth strategy is based on expanding agents and listings coverage, having a mobile-centric platform in the property ecosystem, expanding premium audiences and quality leads, and increasing new transactional revenues. Domain will have a $250 million syndicated bank loan facility with a $154 million of net debt, at the time of the separation. Domain performance thus needs to be looked at carefully with small milestones being achieved by Domain in terms of growth.

- It is expected that Domain listing will bring more momentum and discipline among other online property portal platforms including the long-term player, REA (which is a digital advertising company that operates Australia’s leading property websites and real estate websites in Europe, Asia and the US). The key would be to look at the strategies adopted to outperform others. The geographic penetration of the giant REA is a lot more than what is being uncovered for Domain. On the other hand, growth prospects might look slightly better for Domain given the focussed space of operations.In such a case, both REA and Domain are expected to proffer different types of returns owing to different exposures and focus.It might be thus essential for investors to keep watching this space to evaluate having some exposure to Domain alongside REA, which has been a multi-bagger in last few years.

 

Digital Property Advertising Revenue for Domain and REA (Source: Company Reports)

Disclaimer
 
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.