Stock Spotlight: Rea Group Ltd (ASX:REA)
This week's Stock Spotlight is ASX-listed Rea Group Ltd.
About Rea Group Ltd.
REA Group Limited, together with its subsidiaries, engages in online property advertising business in Australia, India, the United States, Malaysia, Singapore, Thailand, Vietnam, and internationally. It provides property and property-related services on websites and mobile applications. The company operates residential, commercial, and share property sites, such as realestate.com.au, realcommercial.com.au, flatmates.com.au, property.com.au, housing.com, proptiger.com, makaan.com, and realtor.com. It is also involved in the provision of mortgage brokerage and home financing solutions; property data services; mortgage application and e-lodgement solutions for the broking and lending industries; commercial real estate information and technology; and vendor paid advertising and home preparation finance solutions. The company was formerly known as realestate.com.au Ltd. and changed its name to REA Group Limited in December 2008. REA Group Limited was incorporated in 1995 and is headquartered in Richmond, Australia. REA Group Limited operates as a subsidiary of News Corporation.
Source: Yahoo Finance
Key Stats
Key Stats
Source: Yahoo Finance, ASX. Data as of 13/08/24.
Price Performance
Growth Potential
- Clear #1 market position in online property classifieds, with consumers spending over more time on realestate.com.au app than the number two website.
- Growth opportunities via expansion into Asia and North America.
- Forecast to grow yield by double digit (driven by price increases) despite challenges with listing volumes.
- Upside in key markets – particular in areas where REA is under-penetrated and could potentially win market share from competitors.
- New product developments to increase customer experience (including AI enhanced features).
- India represents a meaningful opportunity despite the execution risk.
- Recovery in Associates performance and turnaround in Commercial & Developer segment.
Key Risks
- Competitive pressures lead to a further de-rating of the PE-multiple.
- Volume (listings) outlook remains subdued in the near term.
- Execution risk with Asia/North America strategy.
- Failing to get an adequate return on the recent acquisition of iProperty.
- Value/EPS destructive acquisitions.
- Decline in Australian property market.
- Given REA trades on a very high PE-multiple, underperforming to market estimates can exacerbate a share price de-rating.
- Recent tightening of lending practices by banks would affect the Financial services business.
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Disclaimer: This article does not constitute financial advice nor a recommendation to invest in the securities listed. The information presented is intended to be of a factual nature only. Past performance is not a reliable indicator of future performance. As always, do your own research and consider seeking financial, legal and taxation advice before investing.
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