Media - Integrated: Quick pulse check on volumes coming into results
About the author:
- 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.
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.
Find out more
Download full research note
You can find further detailed analysis of company results this reporting season by browsing our reporting season tag, and view a full list of upcoming results on our Reporting Season Calendar.
If you would like more information, please contact your adviser or nearest Morgans office.
Request a call
Find local branch
Need access to our research?
You are also welcome to start a two-week trial of our online platform, which provides access to detailed market analysis and insights, provided by our award-winning research team.
Create trial account
Disclaimer: The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual's relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents (“Morgans”) do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so.