The REA Group Ltd (ASX: REA) share price is up more than 2% after the company reported a strong FY24 third-quarter update.
REA Group is the owner of realestate.com.au as well as a number of other real estate-related businesses in Australia, and stakes in real estate portals overseas.
FY24 third quarter update
The business reported that the Australian property market continued its “strong momentum” during the quarter, with “seller confidence and healthy buyer demand driving activity”. REA Group called it an exceptional quarter.
For the three months to 31 March 2024, revenue rose 24% to $334 million and operating expenses only went up by 18% to $157 million.
The operating EBITDA (which excludes the share of profits and losses from associates) grew by 30% to $177 million. Including associates, EBITDA went up 24% to $168 million.
Impressively, the free cashflow jumped by 33% to $110 million.
The strong quarter meant FY24 to date (nine months) revenue rose 20% to $1.06 billion and free cashflow rose 39% to $322 million.
Australian property listings
REA Group revealed core Australian revenue increased 24% year on year reflecting double-digit yield growth (how much people are paying for listings) and continued listings growth across its residential and commercial businesses. Excluding the impact of the CampaignAgent acquisition, Australian revenue rose 21%.
Compared to the prior corresponding period, the number of national buy listings increased 6% during the quarter, with Sydney listings up 20% and Melbourne listings up 18%.
The buy yield benefited from a 13% average national price increase, higher premiere+ and total depth penetration, and a positive impact from the geographical mix.
Rent revenue increased with an 8% average price rise and growth in depth penetration, partly offset by a 5% decline in listings.
Revenue related to commercial and developers were boosted by an average 11% price rise, and increased depth penetration and listings. Developer revenue was flat, with lower project commencements, offset by increased project duration.
REA Group said financial services revenue grew “modestly”, with increased penetration of higher-margin white label products, partially offset by a 2% decline in settlements.
India
The company said REA India saw continued momentum, with revenue increasing 31% year on year.
Revenue growth was largely driven by Housing.com’s property advertising business, benefiting from another strong ‘happy new homes’ event, increased depth penetration and improving monetisation in tier 2 cities, and growth in adjacency services on the Housing Edge platform.
Outlook for the REA Group share price
REA Group said the residential property market remains “strong”, particularly in Melbourne and Sydney. The supply of properties for sale is benefiting from rising property prices and increased investor selling in some markets. Demand is being supported by low unemployment and high levels of immigration, according to REA Group.
The earlier timing of Easter has impacted growth rates – March saw a 9% decline but April saw a 32% rise. Sydney and Melbourne listings were up 45% and 53% respectively in April. Year to date national listings were up 7%.
REA Group is expecting listings growth of between 5% to 7% for FY24 and the company is aiming to grow profit margins in FY24.
The residential buy yield growth is expected to be between 18% to 19% in FY24, while in FY25 the buy yield will be driven by an average 10% price increase in its most used product, Premiere+.
REA Group is one of the very best businesses on the ASX, though the REA Group share price continues to reflect that.
With the level of price increases the business is implementing, it seems profit can keep rising at a good pace for some time. But, I’d want to wait for better value before buying – 2022 would have been an appealing time to buy when investors weren’t so excited about ASX growth shares.
