SOL share price
Founded in 1903, Washington H. Soul Pattinson (WHSP) is an investment company with a diversified portfolio of assets across a range of industries and asset classes.
Some of SOL’s largest holdings include stakes in other well-known publicly listed companies such as TPG Telecom (ASX: TPG), New Hope Group (ASX: NHC) and a cross shareholding in Brickworks (ASX: BKW).
SOL’s mission is to deliver superior returns to its shareholders by creating capital growth and steadily increasing dividends as a holding company. It’s the second-oldest publicly listed company on the ASX and has a strong track record of capital growth and dividends. It should be thought of as family-run LIC, for the benefit of all shareholders (who are deeply aligned).
Since we consider Washington H Sl Pttnsn nd Cmpny Ltd to be a blue chip stock, or a mature business, we like to look at things like return on invested capital (ROIC) and revenue growth as signs of sustainability. In FY23, Washington H Sl Pttnsn nd Cmpny Ltd had an ROIC of 8.20% and revenue has compounded at -4.4% in recent years. If a mature business struggles to consistently hit 10% ROIC it could be a sign the business may not be investing its capital effectively. This is just a rule of thumb or ‘general’ we follow.))
REA share price
Founded in 1995, REA Group is a Melbourne-based real estate advertising company that is majority owned by News Corp. In Australia, it operates through its Realestate.com.au platform.
REA Group operates on a global scale and now operates property websites in around 10 countries used by some 20,000 agents. In a typical month, the core Australian website gets over 55 million visits. The business is broken down across geographic lines, with Australia taking the lion’s share of revenue. Within Australia, REA makes money by listing properties for sale or rent (i.e. the agent uses REA’s website to show properties, which the property owner is on the hook to pay). It also makes money from financial services (e.g. mortgage broking), but this is a much smaller part of the business.
Property websites such as Realestate.com.au attract both buyers and sellers and aim to simplify the process resulting in an efficient and stress-free transaction. We believe its competitive advantge is that of any other established platform: network effects and efficient scale. In other words, Domain (the #2 player) is meaningfully behind REA in users and views, which means REA can continue to charge more.
Share price valuation
One way to have a ‘fast read’ of where the SOL share price is, is to study something like dividend yield thru time. Remember, the dividend yield is effectively the ‘cash flow’ to a share holder, but it can be influenced by yearly or bi-yearly fluctuations. Currently, Washington H Sl Pttnsn nd Cmpny Ltd shares have a dividend yield of around 2.71%, which compares to its 5-year average of 2.54%. Put simply, SOL shares are trading below their historical average dividend yield.
The REA share price trades at a price-sales ratio of 18.66x, which compares to its 5-year long-term average of 12.29x. So, its shares are trading higher than their historical average. However, please do more investigating than a simple multiple like this. Our websites explain Discounted Cash Flow (DCF), Dividend Discount Models (DDM), and many different ways to value a share, like Rea Group Ltd.
