REA - REA Group
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Triathlete
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Here is my latest weekly chart on REA analysis.
Chart looks good and have
only been trading it last few months between $62 and $65,I am looking for it to pull back into August although due to a dividend coming up in August the price may hold up till then before a pullback followed eventually by a continuation in price should the results be favourable time will tell though.
Any other views from both FA and TA or those that have been following this stock?
Chart looks good and have
only been trading it last few months between $62 and $65,I am looking for it to pull back into August although due to a dividend coming up in August the price may hold up till then before a pullback followed eventually by a continuation in price should the results be favourable time will tell though.
Any other views from both FA and TA or those that have been following this stock?
Triathlete
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Always good to see that previous analysis (chart above) come good with REA hitting $74.00 today up from $65.11 when first noted 2/6/2017 not sure from here though need to take another look wave 3 still looks good.
Triathlete
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Time to take another look at REA to see how the analysis has turned out....Since 2/6/2017 when the chart was first posted we had a closing price of $65.11 and ran up strongly on what I would call a wave 3 hitting all the price levels noted on the charts above and then some hitting $81.10 for the wave 3 peak.....We have now had the 38.2% retracement which I make as the wave 4 at this moment in time and currently looking a the last wave 5 which I will be looking for a move towards $84.47 to $91.92 as of this moment should we follow Elliott wave......I also like to check and see what the yearly cycles are doing as well so I will post the chart below to help with our Technical analysis...as for the Fundamental analysis I rely on Lincoln stock doctor and their summary is below:
Strategic comment:
REA is a Star Growth Stock suitable for growth investors who want exposure to the number one property classified business in Australia with roots internationally. REA tends to trade at a premium to its industry given that it has a strong market position ahead of its main domestic competitor, Domain (GR4). For this financial year, management has indicated that the 2H18 result may be slightly behind 1H18 due to seasonal factors and increased marketing spend (GR3).
In its latest result, REA reported a 7.6% rise in its annualised earnings before interest, tax (EBIT) with margins rising to 60.7% from 57.4%, despite a fall in the number of listings domestically over the 2Q. However, margins are expected to come under pressure as REA focuses on increasing investment in marketing, product innovation and investment in personnel. Despite this, REA retains strong pricing power as the number one player in the online property advertisement space.
Lincoln valuation....$70.95
Consensus............$78.50
Strategic comment:
REA is a Star Growth Stock suitable for growth investors who want exposure to the number one property classified business in Australia with roots internationally. REA tends to trade at a premium to its industry given that it has a strong market position ahead of its main domestic competitor, Domain (GR4). For this financial year, management has indicated that the 2H18 result may be slightly behind 1H18 due to seasonal factors and increased marketing spend (GR3).
In its latest result, REA reported a 7.6% rise in its annualised earnings before interest, tax (EBIT) with margins rising to 60.7% from 57.4%, despite a fall in the number of listings domestically over the 2Q. However, margins are expected to come under pressure as REA focuses on increasing investment in marketing, product innovation and investment in personnel. Despite this, REA retains strong pricing power as the number one player in the online property advertisement space.
Lincoln valuation....$70.95
Consensus............$78.50
greggles
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Thanks for the analysis. REA has a great looking chart and is in blue sky territory now. They have ridden the Australian property boom all the way up. However, I can't help but wonder how much growth there is left given the recent easing of real estate prices in Sydney and Melbourne. Domain Holdings has performed poorly in comparison since its listing but I think the float was overpriced and badly timed.
REA will be an interesting one to watch to see if they can broaden their revenue base and keep the company growing.
REA will be an interesting one to watch to see if they can broaden their revenue base and keep the company growing.
But does it work on the volume of listings? Lots of people headed for the doors in Sydney (+20%)?
greggles
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REA Group's FY18 financial results have improved considerably on FY17 in spite of the slowdown in the Australian residential property market.
Highlights:
• Revenue of $ 807.7 million, up 20%
• EBITDA of $ 463.7 million, up 22%
• Net Profit of $ 279.9 million, up 23%
• Full year dividend of $ 109.0 cents per share, up 20%
• EPS of 212.5 cents, up 23%
REA is currently trading at $83.87, up 1.90% on yesterday's close.
Highlights:
• Revenue of $ 807.7 million, up 20%
• EBITDA of $ 463.7 million, up 22%
• Net Profit of $ 279.9 million, up 23%
• Full year dividend of $ 109.0 cents per share, up 20%
• EPS of 212.5 cents, up 23%
REA is currently trading at $83.87, up 1.90% on yesterday's close.
On Monday of this week REA gaped up on open and made a new high of $94.37 with a further push up on Wednesday falling a couple of cents short of the high on Monday.
Daily volume has fallen since Wednesday which begs the question...will another assault on the ATH of $94.37 happen this week. A lack of support for a further run up may well result in an Island Reversal.
....and now another 14 months have passed by and the REA looks as though it may be setting up to challenge the ATH of $117.30.
For the last 29 bars the stock has been forming a rectangular pattern with a high of $112.65.
There is also an unfilled gap of $1.09 above the high which occurred at the start of the Covid-19 pandemic.
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Defiantly I reckon REA is worth only a third of its current price, i.e about 7X book value to make 56 bucks. Interestingly (to me) it got down to almost this in the KungFlu CCP Wuhan virology lab caused crisis (hope I got all that in)
Prompted by an article on Livewire where 8 pundits pick their best buy in a crash. Three of them reckon REA.
8 of the best stocks to buy in a sell-off
Prompted by an article on Livewire where 8 pundits pick their best buy in a crash. Three of them reckon REA.
8 of the best stocks to buy in a sell-off
I hear what you are saying. It struck me as odd that 3 of the 'pundits' picked REA. Would love comments from others (based on fundamentals and based on TA).
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REA released its Q1 FY23 results on the 9th November. Revenue and EBITDA grew 16% and 7% YoY respectively. Management continues to target full year positive operating jaws in FY23. The results seem solid and everything looks fine.
But is it really the case?
Trajectory of the quarterly EBITDA and margin might shed some light.
REA’s profitability comes from four line of businesses, namely
Australia – Property & Online Advertising
As we know, this is the bread and butter of REA. In H1 FY22, YoY EBITDA growth was 29% and corresponding margin was 71%. FY22 year end report no longer provides EBITDA breakdown of this business but was combined with Australia Financial Services. We can still find out the top line revenue grew 19% for the whole FY22.
Q1 FY23 result announcement mention growth in listing volume, product price and depth/Premiere penetration remain versus last quarter. Assuming cost structure didn’t change significantly, I reckon the Australia Property & Online Advertising still delivered over 20% YoY EBITDA growth in Q1 FY23.
Australia – Financial Services
The Q1 FY23 report just states “Financial Services revenues declined in the quarter” without the exact figures. This is the Mortgage Choice business REA paid $244 million or $1.95 per share to acquire in 2021.
Mortgage Choice's earnings per share dropped from 11 cents in FY19 to 7.5 cents in FY20 (-31% YoY). Before the acquisition announcement, Mortgage Choice was traded at $1.195 per share. Essentially, REA paid 26x PE ratio or a 75% premium of the market price to acquire Mortgage Choice as a declining business.
With high interest rate and mortgage becomes less affordable, Financial Services will continue to face strong headwinds and become a burden of the company.
India
The Q1 report says “REA India delivered strong revenue growth of 47% for thequarter…” but “Increased investment in REA India is expected to see EBITDA losses widen in FY23…”. Looking at the revenue growth trajectory:
India’s economy was badly impacted by COVID till mid-2021. The Q1 FY22 (Jul-Sep 2021) results didn’t state the revenue of India business, it can’t determine whether the growth in Q1 FY23 (Jul-Sep 2022) is due to a low baseline in 2021. I’m looking forward to seeing the H1 FY23 revenue versus same time in FY22.
Though REA paid almost $100m in 2020 for the acquisition, India business will remain EBITDA negative and continue to drag the group’s profitability in the foreseeable future.
Equity Accounted Associates
There are three investment holdings in this line of business, namely Move, PropertyGuru and Other.
Move was acquired by REA and News Corp in 2014. It contributed to a total of $30m profit in FY21 & FY22.
REA invested $52m into PropertyGuru in 2021. PropertyGuru went IPO in NYSE in March 2022 for US$10 per share. Yesterday’s closing price was US$5.25 or equivalent to a 47.5% drop since IPO. REA had written off $6m in FY22 for this investment. If PropertyGuru’s share price continues to decline with the US market, more write off is possible.
In a nutshell, I think REA owns a highly profitable Property and Online Advertising business in Australia. However, the management made several acquisitions and investments between 2020-21 (Mortgage Choice, India Business & PropertyGuru) right before the world was moving from a loosening to a tightening monetary environment. The global tightening environment are strong headwinds for REA’s newly acquired businesses and will continue to drag the company’s profitability. This is not to mention the premiums already paid for making those acquisitions when the market was still hot. Those acquisitions turn out to be bad decisions as the management failed to anticipate a paradigm shift in the global economy.
The stock is currently trading at a 38x PE ratio (TTM). With a single digit to at most low double-digit earnings growth, PEG is much greater than 1 and the valuation is obviously too high. I won’t be surprised if the stock price continues to decline.
But is it really the case?
Trajectory of the quarterly EBITDA and margin might shed some light.
- Q1 FY22: $158m (+24% YoY) @ 59%
- Q2 FY22: $210m (+28% YoY) @ 64%
- Q3 FY22: $155m (+27% YoY) @ 55%
- Q4 FY22: $150.5m (+0.5% YoY) @ 50%
- Q1 FY23: $169m (+7% YoY) @ 55%
REA’s profitability comes from four line of businesses, namely
- Australia – Property & Online Advertising
- Australia – Financial Services
- India
- Equity-Accounted Associates (e.g. overseas investments)
Australia – Property & Online Advertising
As we know, this is the bread and butter of REA. In H1 FY22, YoY EBITDA growth was 29% and corresponding margin was 71%. FY22 year end report no longer provides EBITDA breakdown of this business but was combined with Australia Financial Services. We can still find out the top line revenue grew 19% for the whole FY22.
Q1 FY23 result announcement mention growth in listing volume, product price and depth/Premiere penetration remain versus last quarter. Assuming cost structure didn’t change significantly, I reckon the Australia Property & Online Advertising still delivered over 20% YoY EBITDA growth in Q1 FY23.
Australia – Financial Services
The Q1 FY23 report just states “Financial Services revenues declined in the quarter” without the exact figures. This is the Mortgage Choice business REA paid $244 million or $1.95 per share to acquire in 2021.
Mortgage Choice's earnings per share dropped from 11 cents in FY19 to 7.5 cents in FY20 (-31% YoY). Before the acquisition announcement, Mortgage Choice was traded at $1.195 per share. Essentially, REA paid 26x PE ratio or a 75% premium of the market price to acquire Mortgage Choice as a declining business.
With high interest rate and mortgage becomes less affordable, Financial Services will continue to face strong headwinds and become a burden of the company.
India
The Q1 report says “REA India delivered strong revenue growth of 47% for thequarter…” but “Increased investment in REA India is expected to see EBITDA losses widen in FY23…”. Looking at the revenue growth trajectory:
- H1 FY22:$24.5m
- H2 FY22: $29.4m(20% Vs H1)
India’s economy was badly impacted by COVID till mid-2021. The Q1 FY22 (Jul-Sep 2021) results didn’t state the revenue of India business, it can’t determine whether the growth in Q1 FY23 (Jul-Sep 2022) is due to a low baseline in 2021. I’m looking forward to seeing the H1 FY23 revenue versus same time in FY22.
Though REA paid almost $100m in 2020 for the acquisition, India business will remain EBITDA negative and continue to drag the group’s profitability in the foreseeable future.
Equity Accounted Associates
There are three investment holdings in this line of business, namely Move, PropertyGuru and Other.
Move was acquired by REA and News Corp in 2014. It contributed to a total of $30m profit in FY21 & FY22.
REA invested $52m into PropertyGuru in 2021. PropertyGuru went IPO in NYSE in March 2022 for US$10 per share. Yesterday’s closing price was US$5.25 or equivalent to a 47.5% drop since IPO. REA had written off $6m in FY22 for this investment. If PropertyGuru’s share price continues to decline with the US market, more write off is possible.
In a nutshell, I think REA owns a highly profitable Property and Online Advertising business in Australia. However, the management made several acquisitions and investments between 2020-21 (Mortgage Choice, India Business & PropertyGuru) right before the world was moving from a loosening to a tightening monetary environment. The global tightening environment are strong headwinds for REA’s newly acquired businesses and will continue to drag the company’s profitability. This is not to mention the premiums already paid for making those acquisitions when the market was still hot. Those acquisitions turn out to be bad decisions as the management failed to anticipate a paradigm shift in the global economy.
The stock is currently trading at a 38x PE ratio (TTM). With a single digit to at most low double-digit earnings growth, PEG is much greater than 1 and the valuation is obviously too high. I won’t be surprised if the stock price continues to decline.
DrBourse
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REA Group Ltd….
Financials Suggest SELL:- Technicals Suggest HOLD:-
First the Financials:-
BAD Points of interest:-
Revenue has not increased as expected.
Very Bad P/E in relation to NTA (Price is trading well above NTA).
An Expensive Price relative to CPI.
Very Bad Earning Power.
Expensive in relation to the Average of the past 3 years EPS.
The 10 Year Bond Rate provides better value than REA’s High Share Price..
Book Value Ratio is 11.10, even at a max of 2 times, that = an REA SP of abt $22-00.
GOOD Points of interest:-
Costs are being passed onto clients.
Good ability to pay Interest Liability from Current Earnings.
Very Good ROE & Shareholder’s Equity.
Debt is providing positive returns to shareholders.
The Technicals
Although the recent ST TA shows a current Uptrend there are numerous ST TA signals suggesting that trend is about to Reverse…
Immediate Resistance Line is at about $172-00…
Immediate Support Line is @ about $120-00…
And there are 3 other Lines between the $170-00 & $120-00 Lines…
Candles for 31/8/23 and 1/9/23 form a Tweezer Top (page 13)
Candles for 11/10/23 and 12/10/23 form another Tweezer Top…
And with a little bit of imagination, there is a “Head & Shoulders” formation (page 18 & 19) with the candles for 1/8/23 being the Left Shoulder, the candle for 31/8/23 could be the Head, and the candle for 11/10/23 could be the Right Shoulder…
The candles for 11/10/23 – 13/10/23 show that Sellers are in control atm (page 5)
The Candles for Aug & Sept 23 represent a Slight Loss of Momentum (page 17)
The 200 Day Linear Regression (pages 139 – 142) show that the current 8 Day ST Uptrend has NOT Risen above the previous peak on 31/8/23….
Current Indicators suggest Exit for the ST….
There is not a strong enough combination of candles to create a Benchmark Formation (pages 197 – 199), although the green candles from 4/10/23 to 10/10/23 were close, the candles for 11, 12 & 13/10/23 cancelled out the candle for 10/10/23.
So, from that TA, the REA SP could go either way, it’s a day-to-day puzzle….
THERE IS NOTHING IN THE CURRENT FINANCIALS, OR TECHNICALS, TO SUPPORT THE CURRENT SP… ANY SP ABOVE THE CURRENT IV of $128-48 IS PURELY AN OVER-RECTION BY “HAROLD & HIS BROKERS”…
I expect REA will eventually pull back to the $120-00 Support Line, or Lower, in the “Short to Near Term Future”..
Cheers..
DrB
Financials Suggest SELL:- Technicals Suggest HOLD:-
First the Financials:-
BAD Points of interest:-
Revenue has not increased as expected.
Very Bad P/E in relation to NTA (Price is trading well above NTA).
An Expensive Price relative to CPI.
Very Bad Earning Power.
Expensive in relation to the Average of the past 3 years EPS.
The 10 Year Bond Rate provides better value than REA’s High Share Price..
Book Value Ratio is 11.10, even at a max of 2 times, that = an REA SP of abt $22-00.
GOOD Points of interest:-
Costs are being passed onto clients.
Good ability to pay Interest Liability from Current Earnings.
Very Good ROE & Shareholder’s Equity.
Debt is providing positive returns to shareholders.
The Technicals
Although the recent ST TA shows a current Uptrend there are numerous ST TA signals suggesting that trend is about to Reverse…
Immediate Resistance Line is at about $172-00…
Immediate Support Line is @ about $120-00…
And there are 3 other Lines between the $170-00 & $120-00 Lines…
Candles for 31/8/23 and 1/9/23 form a Tweezer Top (page 13)
Candles for 11/10/23 and 12/10/23 form another Tweezer Top…
And with a little bit of imagination, there is a “Head & Shoulders” formation (page 18 & 19) with the candles for 1/8/23 being the Left Shoulder, the candle for 31/8/23 could be the Head, and the candle for 11/10/23 could be the Right Shoulder…
The candles for 11/10/23 – 13/10/23 show that Sellers are in control atm (page 5)
The Candles for Aug & Sept 23 represent a Slight Loss of Momentum (page 17)
The 200 Day Linear Regression (pages 139 – 142) show that the current 8 Day ST Uptrend has NOT Risen above the previous peak on 31/8/23….
Current Indicators suggest Exit for the ST….
There is not a strong enough combination of candles to create a Benchmark Formation (pages 197 – 199), although the green candles from 4/10/23 to 10/10/23 were close, the candles for 11, 12 & 13/10/23 cancelled out the candle for 10/10/23.
So, from that TA, the REA SP could go either way, it’s a day-to-day puzzle….
THERE IS NOTHING IN THE CURRENT FINANCIALS, OR TECHNICALS, TO SUPPORT THE CURRENT SP… ANY SP ABOVE THE CURRENT IV of $128-48 IS PURELY AN OVER-RECTION BY “HAROLD & HIS BROKERS”…
I expect REA will eventually pull back to the $120-00 Support Line, or Lower, in the “Short to Near Term Future”..
Cheers..
DrB
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Yeah, it's worth 66 bucks
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one of those shares where if you got in relatively early and HELD ( some ) you are probably doing fine
however puking and probing now , leaves a less compelling argument ( on whether to buy )
( not held )
Dona Ferentes
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you can expect what you like.
meantime, Some may say the target was recalcitrant, but REA has pulled the plug after 4 attempts. Up 5 per cent to $210.
Statement regarding Rightmove plc:
REA withdraws possible offer for RightmoveREA continues to exercise the financial discipline that has underpinned long-term value creation
Further to Rightmove’s announcement on 30 September 2024 that it had rejected REA’s fourth non-binding indicative proposal, made on 27 September 2024, regarding a possible cash and share offer for the entire issued and to be issued share capital of Rightmove plc, REA confirms that it does not intend to make an offer for Rightmove.
Dona Ferentes
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This is going to fall so fricken hard in the crash.
Generous at half the price
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Generous at half the price
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Not envious
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