The REA Group Limited (ASX: REA) share price is under the spotlight after reporting its FY24 half-year result.
REA Group operates realestate.com.au and a number of other property sites.
FY24 half-year result
Here are some of the main highlights from the six months to 31 December 2023:
- Revenue rose 18% to $726 million
- Operating expenses grew 11% to $287 million
- EBITDA (excluding associates) (EBITDA explained) rose 22% to $439 million
- Underlying net profit after tax (NPAT) jumped 22% to $250 million
- Underlying profit / earnings per share (EPS) went up 22% to $1.89
- Statutory NPAT fell 37% to $127 million
- Dividend per share increased 16% to $0.87
What caused the huge difference between underlying and statutory net profit? It put that down to impairments on investments in PropertyGuru (which is listed and has seen its share price decline) and Realtair.
The ‘residential’ revenue increased by 19% to $505 million, with ‘buy’ growth driven by a 19% increase in the buy yield and a 4% increase in national listings – Sydney listings increased by 19% and Melbourne listings rose 18%. The buy yield benefited from a 13% average national price rise.
Commercial and development revenue increased 11% to $80 million, with an average 11% price rise.
Media, data and other revenue increased by 21% to $60 million, though it was flat excluding the CampaignAgent acquisition – CampaignAgent delivered strong revenue growth after consolidation from July 2023.
International growth
REA India experienced revenue growth of 21% to $44 million and operating costs went up 7% to $63 million. Revenue from property and advertising increased by 32%. Housing.com benefited from price increases, increased depth penetration and customer growth. Improving market conditions drove PropTiger commissions higher. I think this division could be key for REA Group share price growth in the future as it gets bigger.
It revealed it had made a small investment in Easiloan to buy 20.7%, it’s a technology platform for end-to-end digital processing of home loans in India.
REA Group has a 20% stake in Move Inc, which operates realtor.com, a leading property portal in North America. Move revenue fell 15%, impacted by a challenging environment with high interest rates.
The ASX company also owns 17.3% of PropertyGuru, a NYSE listed business. Its contribution to REA Group was breakeven in HY24, an improvement from the $2 million loss in the prior year. Growth in Singapore and Malaysia offset “market challenges” in Vietnam.
Outlook for the REA Group share price
REA Group said the property market remains “healthy” with national listing growth of 12% in January, and 28% growth of listings in Sydney and Melbourne.
It suggested the residential buy yield growth is anticipated to be lower in the second half, as the first half outperformance of Melbourne and Sydney is “unlikely to continue for the entire period”.
Group operating cost growth in the mid to high-teens is expected in FY24, with an improvement in operating profit margins. Excluding acquisitions, operating cost growth for both Australia and India is expected to increase in the low to mid teens. The EBITDA loss in India is expected to be lower in FY24 compared to FY23.
REA Group is one of the best businesses on the ASX in my view, but it’s certainly priced that way as well. I wish I owned it, but sadly didn’t buy in the past. If it went through a heavy decline, I’d take a very close look because of its very strong market position.
For now, there could be other ASX growth shares that are better value which could be better buys.
