The REA Group Ltd (ASX: REA) share price is in focus after releasing its financials for the FY25 first quarter.
REA Group is the owner of realestate.com.au and various other property businesses, including REA India.
FY25 Q1 update
REA Group reported its performance for the quarter to September 2024. It told investors how it performed with its core operations (which excludes costs relating to the Rightmove attempted acquisition).
Revenue rose by 21% to $413 million, operating expenses grew by 19% to $170 million and EBITDA grew by 23% to $236 million. Free cashflow increased by 16% to $74 million.
Divisional performance
In Australia, core revenue grew by 20% thanks to double-digit yield growth and continued listing growth in its residential and commercial businesses. Excluding the addition of the Realtair acquisition, Australian revenue rose by 19%.
National residential listings increased by 7%, with Sydney listings up by 11% and Melbourne listings up by 9%. The Australian residential business saw revenue growth of 23%, with a 15% increase in the yield (helped by price increases) and the 7% growth of new listings. There was a 10% average Premiere+ price rise.
The company said the realestate.com.au audience gap widened to its nearest competitor to a record 5.3 million people. There was a 7% year over year increase for average monthly buyer enquiries on realestate.com.au.
REA Group’s Australian rent revenue rose, with an 8% average price rise and an 8% increase in listings.
Turning to REA India, this segment saw revenue growth of 42%, thanks to growth of adjacency services on the Housing Edge platform and continued momentum at Housing.com which benefited from “strong events”, yield growth and improved monetisation in Tier 2 cities. REA India expenses grew by 26%, largely due to higher revenue-related costs.
In the US, conditions continued to be challenging.
On 31 October, REA Group agreed to acquire a 19.9% stake in Athena Home Loans, with the $60 million investment funded from existing cash reserves.
Outlook for the REA Group share price
The company noted the Australian residential property market remains “healthy, with strong employment, high immigration levels, the benefit of recent tax cuts and stable interest rates supporting buyer demand and seller confidence.”
The increase in Melbourne and Sydney new listings over the last 12 months has led to higher levels of available stock, resulting in more moderate property price growth and a small increase in the number of days on site.
But, in Brisbane, Perth and Adelaide, demand continues to outweigh listings, driving strong property price growth and faster selling times.
October national residential new buy listings were up 14% year on year, or 7% excluding extra working days. Melbourne and Sydney listings grew by 12% and 14% respectively in October.
REA Group is expecting revenue to rise faster than expenses in FY25.
I think this ASX share is a great company, and as a shareholder I’m pleased with the earnings growth. However, after a 46% rise of the REA Group share price over the past year, I wouldn’t say it’s an obvious buy now. A lot of growth is factored into the valuation. But, the Indian segment’s growth is looking very promising for the long-term.
For now, there are other ASX growth shares I’d rather buy which aren’t priced so highly.
