REA Group Limited (ASX: REA) has reported its FY19 third quarter financial information, will the share price be affected by house prices?
REA Group is the owner of Australia’s most popular real estate portal, realestate.com.au. It owns other property leading sites such as realcommercial.com.au too. It also has stakes in several other international property sites in the US, South East Asia and India.
REA Group’s FY19 Third Quarter
For the three months ended 31 March 2019, REA Group’s revenue after broker commissions increased by 7% to $198.6 million and EBITDA increased by 6% (click here to learn what EBITDA means).
Even better was the free cashflow which increased by 27% to $82.9 million.
As a result of the March quarter, the nine months to March 2019 show that revenue is up 13%, EBITDA is up 15% and free cash flow is up 23% so far in FY19.
REA Group pointed to the strength of its Australian Residential and Developer businesses (and the inclusion of Hometrack, which wasn’t in the prior figures).
The company said that it’s currently a particularly challenging market with significant declines in new residential listings and new project commencements.
REA Group CEO Owen Wilson commented, “It’s almost a decade since we’ve seen market conditions like these, especially in Sydney where the decline has been the most pronounced.”
However, there may be light ahead: “With the Banking Royal Commission now behind us and the Federal Election taking place next weekend, we expect less uncertainty surrounding the property market as we enter the new financial year,” said Mr Wilson.
The Asia segment continued to deliver revenue growth and maintained its audience lead in Malaysia and Indonesia, according to REA Group.
During the quarter it launched ‘Loan Care’ in Malaysia and Agent Ratings and Reviews on realestate.com.au, adding more value to its offerings, which should increase audience engagement.
Outlook
The fourth quarter is expected to be even slower with listing sluggish because of consecutive long weekends over Easter and ANZAC Day, as well as the Federal Election.
At over $80 I don’t think REA Group is a bargain buy, but I do think it has a long term future with its Asian and US investments, along with the ability to win some revenue from almost every property advertised in Australia. It seems to have better market power than Domain Holdings Australia Ltd (ASX: DHG).
However, the two ASX growth shares in the free report below could be even better choices for returns than REA Group for the next couple of years.
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