The REA Group Limited (ASX: REA) share price is in focus after delivering profit growth per share of 21%.
REA Group is the owner of several real estate internet sites including realestate.com.au.
REA Group’s FY21 result
The company reported that revenue increased by 13% to $928 million in FY21.
There was a strong recovery of the residential market despite significant first quarter listing declines in Melbourne because of COVID-19. Nationally, listings were up 15%, with Sydney listings up 25%.
REA Group said that strong cost management across the year led to core operating cost growth (excluding acquisitions) being just 3% year on year.
EBITDA (EBITDA explained) including associates increased by 19% to $565 million.
Net profit after tax (NPAT) rose by 18% to $318 million and earnings per share (EPS)
went up 21% to $2.47.
Elara
Elara is an Indian real estate portal business. In December 2020, REA Group achieved a controlling stake in the business. It owned 60.7% of the business at 30 June 2021.
Excluding the impact of acquisitions, revenue increased by 11% for the year, EBITDA including associates rose 21% and net profit was up 24%.
This segment could be helpful for the REA Group share price in the coming years – India is a huge market.
Asia
REA Group’s Asian division, which includes various investments, saw revenue decline by 16% because of COVID-19 impacts.
On 31 May 2021, REA Group entered into a deal to transfer ownership of its Malaysia and Thailand entities to PropertyGuru in exchange for an 18% equity interest. This transaction completed on 3 August 2021.
On 24 July 2021, PropertyGuru announced a business combination with the special purpose acquisition company Bridgetown 2, where PropertyGuru will list on the New York Stock Exchange. REA will subscribe for US$52 million of equity. REA Group expects to hold around 15.8% of the business.
Dividend
The board is going to pay a final dividend of $0.72 per share. Combined with the interim dividend, that totals $1.31 per share, an increase of 19%.
Outlook and thoughts on the REA Group share price
REA Group referenced the current lockdowns and said that lockdowns impact listings. However, it also said that markets can recover quickly when restrictions lift.
The Australian residential business will benefit from price increases which started in 1 July 2021. Listing volumes were down 3% year on year. Melbourne listings were up 3%, while Sydney listings were down 22%.
REA Group is confident about Elara, which is why it will be investing for growth. The acquisition of Mortgage Choice also increases its earnings diversification.
However, the REA Group share price is valued at a high double digit earnings multiple, which seems expensive with the profit growth rate and ongoing lockdowns. However, it does have a very strong market position and interest rates remain low.
But there are other ASX growth shares that could be better value ideas.
