REA Group Ltd

REA Details

REA Group Ltd (ASX: REA) is a multinational digital advertising company, specializing in property. The company operates Australia’s leading residential and commercial property websites (realestate.com.au and realcommercial.com.au) as well as a leading website devoted to share property, Flatmates.com.au.

Result Performance (FY21 Ended 30 June 2021)

• Revenue of the company for FY21 stood at $928 million, an increase of 13% on previous year. The rise in revenue was driven by the 13% rise in the Australian business, implying the robust residential market recovery despite significant first quarter listing declines in Melbourne because of the COVID lockdown measures.
• After including associates, EBITDA stood at $565 million, an increase of 19% on previous year. Net Profit for the period stood at $318 million, an increase of 18% on previous year.
• The full year dividend stood at 131 cents per share, an increase of 19% on previous year.

Key Data (Source: Company Reports)

Outlook

FY22 results are expected to include the consolidation of Mortgage Choice and Elara for the full year, and the divestment of the Malaysia and Thailand operations from 3^rd August 2021.

Also, the equity-accounted investments portfolio will reflect the results of recent acquisitions and the divestment of 99 Group from August 2021, which would be replaced by the investment in PropertyGuru. The company is entering the new financial year with the robust momentum, despite the ongoing lockdowns. Notably, this momentum, coupled with the strategic investments as well as product roadmap, offers excellent platform for the continued growth.

Key Risks

The upgrade of new technologies and rising competition from present or new sites and apps could impact the existing business model of the company. Security occurrences caused by the adversarial, accidental, or environmental threat could result in the theft or destruction of confidential consumer/customer data and/or loss of REA system integrity.

Valuation Methodology: Price/Earnings Per Share Based Relative Valuation (Illustrative)

Technical Overview:

Chart:

Source: REFINITIV

Note: Purple Color Line Reflects RSI (14-Period)

Stock Recommendation

The stock posted 6-month and 1-year returns of ~+2.98% and ~+32.5%, respectively. The stock has been valued using Price/EPS multiple-based illustrative relative valuation and the target price so arrived reflects a rise of low-double-digit (in % terms). A slight premium has been applied to Price/EPS Multiple (NTM) (Peer Average) considering rise in reported operating income in FY 2021 on the YoY basis as well as decent outlook.

Considering the aforementioned factors, we give a “Buy” recommendation on the stock at the current market price of $151.810 per share, down by 2.624% as on 5^th October 2021.

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined:-

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices

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