REA Group: Listings remain subdued

About the author:

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

  • REA Group (ASX:REA) released its 3Q23 trading update, which in our view highlighted a broadly tougher quarter overall for the group, particularly in terms of listings volumes, which remain subdued. Indeed, national listings were down 12% in the quarter (vs pcp). Australia operating jaws are expected to be negative for FY23, with mid-single cost growth now flagged for the group (vs previously “high single-digit growth”).
  • Solid topline growth in REA India (+63% on pcp) and the expected Buy yield growth of “double digits” in FY24 (average 12% price increase for Premiere+) were the key positive highlights in the update, in our view.
  • We lower our FY23F-FY25F EPS by ~0.3%-4% factoring in the quarterly update, lower new listings volumes than previously anticipated and higher near-term costs impacting margins. Our DCF-derived valuation increases to (login to view) on the above changes, higher medium-term volume growth (as we expect volumes to begin to recover from 2Q24) and a valuation roll-forward. With < 10% TSR relative to our price target, we move to a Hold recommendation.

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