Media - Integrated: Quick pulse check on volumes coming into results

About the author:

Steven Sassine
Author name:
By Steven Sassine
Job title:
Associate Analyst
Date posted:
09 February 2023, 7:30 AM
Sectors Covered:
Diversified Financials

  • With reporting season upon us, we take a quick stock-take of the classified players and how listing volumes are shaping up early in 3Q23. The general theme has continued to be one of moderating volumes (REA/SEK) versus pcp where listings volumes were exceptionally strong.
  • We expect continued weakness and volatility around new listing volumes for REA over 2H23, however we expect yield growth to offset this a degree. We anticipate SEK FY23 guidance to be reiterated (post being reaffirmed at the AGM) as job ads volumes remain resilient. We expect CAR to benefit from yield uplift (recent price rises) and recovering inventory levels.
  • We make several forecast changes across REA/SEK/CAR factoring in latest volumes data (details overleaf). We make no changes to recommendations.

Listing trends

Coming into the result period, we update our forecasts taking into account the recent listing trends in the classifieds space.

Broadly, we note the key theme has continued to be one of moderating volumes versus the pcp where we note particularly for REA/SEK that listing/job ads volumes were exceptionally strong.

REA: Expecting some volatility around new listings outlook

Coming into the REA 1H23 result (Feb 10th), we sit broadly in line with half-yearly consensus for group revenue (+~3% growth on pcp) and EBITDA (~-3% growth on pcp). We continue to expect that yield growth should underpin the Australia Resi performance in FY23 on contracted price rises (and continued take up of depth products, e.g Premiere+).

Early 3Q23 listings data appears well down on pcp (-18% on pcp on data up to 5 February), however we note the real test will be the remainder of February for national new listings which, on Corelogic data, has previously averaged solid growth on the January lows (as the housing market moves out of its seasonal lull). However, we remain cautious on listings volumes over the remainder of 2H23 and factor further declines into our estimates (-10%).

Potentially offsetting volumes declining in the near term, we note REA has shown the ability to deliver > 10% yield growth through the cycle and further cost-out measures cannot be ruled out. Broadly, we expect additional volatility in the name near-term, however remain attracted to the long- term growth of the business.

SEK should keep to guidance and CAR should point to yield growth

SEK: SEEK’s most recent January Employment dashboard (7 February) indicated national job ads rose 2.8% on December but down ~8% on pcp. However, as has been the trend in recent months, we have noted an uptick in candidate activity (+9% month-on-month), which bodes well for SEEK’s dynamic pricing strategy.

A few things to note going into this result. 1) FY23 Guidance was reaffirmed at SEEK’s AGM (EBITDA A$560m-A$590m) and was tweaked slightly to include the acknowledgement that ads volumes will “continue to moderate”.

We continue to expect yield uplift in Australia (aforementioned increase in candidate engagement/dynamic pricing) and continued resilient performance in Asia (Seek Asia is performing slightly ahead of revenue expectations driven by yield).

Overall, we continue to see a tight labour market (ABS last reporting job vacancies at ~444k and > 27% of businesses still reporting they are looking to hire) and an increase in candidate activity as the basis for a reliance on SEEK’s product set in the near term.

CAR: With Carsales reporting on 13 February, we remain attracted to the opportunity of growing yield over FY23 (noting CAR brought forward a domestic price rise for leads by ~8-9% for new and used cars in October-22).

Our 1H23 numbers sit broadly in line with consensus at revenue/EBITDA, which we remain comfortable with given the normalising of inventory levels, the strong 1Q23 performance from Trader Interactive (1Q23 annualised revenue +10% on FY22) and the ongoing momentum in Encar.

We have Inventory levels on Carsales continuing to recover, although flat on the past fortnight. Volumes are up ~30% vs July-22 and ~33% above pcp. We remain attracted to the CAR growth optionality longer-term, however retain a hold on valuation grounds.

Changes to forecasts

We make several forecast changes across REA/SEK/CAR factoring in latest volumes data (details overleaf).

We make no changes to recommendations.

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