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Mid-Cap

Three Online Stocks with Value - Carsales.Com Ltd, REA Group Limited + SEEK Limited

September 24, 2015 | Team Kalkine
Three Online Stocks with Value - Carsales.Com Ltd, REA Group Limited + SEEK Limited

Carsales.Com

 
Recently, the company, which is the leading automotive listing site in Australia, won a legal battle against competitor Carsguide regarding misleading and deceptive conduct. The latter company was found by the Supreme Court of Victoria to have made representations in advertising which accused Carsales of selling the contact details of customers. Judge James Judd held that in making these representations through the advertising campaign, Carsguide has indulged in conduct which is misleading and deceptive or is likely to mislead and deceive the Australian public. Clearly, Carsales is serious about protecting its market leading position and this verdict removes a cloud over the company's head which could have been worrisome for some investors. The company can now look forward to executing its future growth plans without worrying about any uncertainties.


Results (Source: Company Reports)
 
The company, which has a market capitalisation of around $ 2.5 billion, is the dominant provider of classifieds for new and used cars in Australia and also has investments in overseas businesses which would provide diversification by way of investor exposure to the fast-growing markets of Asia and Latin America. It has announced its financial results for FY 2015 reporting a 32% growth in operating revenues to $ 311.8 million and a growth of 12% in EBITDA to $ 154.3 million. CEO and Managing Director Greg Roebuck said that revenue performance continued to be a core focus for the group and the 32% revenue growth reflected this focus. Other key highlights were the earnings performance and the EBITDA growth, strong revenue growth in Brazil and South Korea, the 7% growth in the core domestic business, the strong growth of Data Research and Services and the above expectations performance of Stratton Finance which was acquired in July 2014. Domestic trading conditions in the first six weeks of FY 2016 have continued to be solid and the company expects to see further growth from domestic investments. Moreover, EBITDA margins are to be maintained at the current levels. It also expects to see solid improvements in its overseas investments if the current conditions continue to prevail.


CAR Daily Chart (Source: Thomson Reuters)
 
We have faith in the continuing robust performance of the company and accordingly rate it as a Buy at the current price of $9.61.
 

REA Group Limited

 
Stock markets can react in the most unexpected fashion and this was proved when this company, the leading online property website in Australia, announced a pretty impressive set of numbers when it released its full results. The share price fell by 8% before climbing up 7.5% which is a large swing when considered over just two trading sessions. The company reported a 20% growth in revenue to $ 522.9 million, a 27% growth in EBITDA to $ 285.8 million and a 24% growth in net profit to $ 185.4 million. EPS was up 24% to 140.6 cents per share and the final dividend was 40.5 cents per share. Group CEO Tracey Fellows said that the 20% growth in revenues from the Australian business was impressive considering the 4% decline in listing volumes in Australia during this period.


Statistics (Source: Company Reports)
 
The performance has been achieved by providing customers with more choices and better value and by giving the 3.4 million customers who use the website every month with an exceptional user experience. The strategy to use their expertise both internationally and in new markets gathered pace during the year. The company has expanded into the US which is the world's largest property market with Move and into one of the fastest growing regions in the world, Asia, through the iProperty investment. The utility connections service was also launched to help people moving to compare rates and organise connections for the property such as gas, electricity and subscription TV.
 
The strength of the market leadership in Australia is demonstrated by some statistics. Average monthly visits to the main and mobile sites grew by 26% and are 24.3 million monthly higher than the number two site, Realestate.com.au has 5.7x of user engagement on the site and averages 242 versus 42 million average minutes per month. Finally, the average number of page views every month on the site is 991 million which is 6.4 times when compared to the number two site.


REA Daily Report (Source: Thomson Reuters)
 
We can see a number of strengths in the company such as strong growth in earnings and EPS, tight management of operating costs, an impressive market leadership position, expansion in international activity and the strategic investments. We would rate the stock as a Buy at the current price of $44.11.

SEEK Limited 



The company has reported its results for FY 2015 and achieved record results in conjunction with a noteworthy level of reinvestment being made. The highlights for the year included strong growth in revenues and EBITDA, strong cash flows resulting in a dividend growth of 20% over the previous year, strong benefits from reinvestment in products and technology and the establishment of the company as well as Zhaopin as the market leaders in key markets in south-east Asia and across China respectively. The financial results show a growth of 20% in revenues to $ 858.4 million, 15% in EBITDA to $ 348.9 million and a 6% increase in NPAT to $ 189.8 million. The dividend was raised by 20% to 36 cents per share.
 
Co-founder and CEO Andrew Bassqt said that other key highlights included the successful integration of JobDB and JobStreet, Zhaopin establishing itself as the market leader in the Chinese market, strong results from the online employment business in Australia and New Zealand, and the successful launch of Premium Talent Search. Australia and New Zealand showed strong revenue growth of 14% and clear market leadership with 32% of placements which is 10 times as much as the nearest competitor. Total visits showed a CAGR of 29% over FY 2012 with more than 35 million visits, mobile visits with a CAGR of 47% to 20.8 million, and CV profiles with a CAGR of 63 % to 6.1 million.


Revenue and EBITDA (Source: Company Reports)
 
The international operations delivered "look through" revenues of $ 333.1 million indicating a growth of 31% over the previous year and EBITDA growth of 34% at $ 108 million. There is a track record of growth from market leading businesses operating in markets having high growth resulting in robust financial results as well as the key operating metrics. Zhaopin continues to deliver outstanding operational and financial results and has shown itself to be the market leader in China across jobseekers as well as the number of unique customers. Revenue growth across the group for FY 2016 is expected to be between 15% and 18% while EBITDA is expected to grow between 5% and 8%.

Though the multiple may seem to be relatively high with a P/E of more than 20 times, the premium seems reasonable when compared to the high quality, growth potential and other attractive factors and we would rate the stock as a Buy at the current price of $11.94.


SEK Daily Report (Source: Thomson Reuters)

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