REA share price: everything you need to know before the FY21 results
We examine some of the key things traders and investors need to know about REA Group before the company reports its full-year results.
Property market continues to run
Housing values continued to rise in July, with the average dwelling value across Australia increasing 1.6%, according to CoreLogic. Year-to-date dwelling prices are up 14.1%, with the median dwelling price standing at around $656 thousand.
Commenting on these consistent prices rises, CoreLogic's research director, Tim Lawless recently said:
'With dwelling values rising more in a month than incomes are rising in a year, housing is moving out of reach for many members of the community.
'Along with declining home affordability, much of the earlier COVID related fiscal support (particularly fiscal support related to housing) has expired,’ Mr Lawless added.
Against that favourable backdrop, REA Group, which represents Australia’s largest property advertising website has seen its share price perform well, but not spectacularly. Since January the stock is up close to 10%. At the time of writing REA traded at $169.11 per share, giving the company an implied market capitalisation of around $22 billion.
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A busy six months
This all comes as REA has completed a number of key transactions. In the last six months the company finalised its acquisition of Mortgage Choice Limited, built a stake in PropertyGuru and divested its stake in 99 Group.
From an operational perspective, with Australia’s housing market in strong form across CY21, REA Group in the third quarter notched up modest double-digit revenue and earnings (EBITDA) growth.
Here, for the three months ending 31 March and when excluding acquisitions, REA reported the following:
- Revenues, on an ex-broker commission basis of $225.6 million, up 13% year-on-year
- Earnings (EBITDA), inclusive share of profit/ losses from associates of $123.3 million, up 10% year-on-year
Despite those results, costs came in ahead of revenue and earnings growth, rising 29% in the quarter, to come in at $103 million. On an ex-acquisition basis, operating costs grew 8%.
With the company exhibiting good cost discipline for the nine months to March 31, heading into the full-year, investors will likely be keen to see operational costs reigned in during the fourth quarter.
Heading into the full-year results, management said they expected operational costs 'to increase marginally on FY20 as revenue-related variable costs are higher than previously expected.'
Free cash flow was also weaker in the Q3, dropping 2% to come in at $65.4 million. On an ex-acquisition basis however free cash flow was 5% higher than it was during the prior corresponding period.
As part of the Q3 results REA’s CEO, Owen Wilson, said:
'Conditions are aligned for the Australian property market to continue its positive trajectory for the remainder of 2021. This momentum, combined with strategic investments made throughout FY21, positions REA for a strong finish to the year.'
REA Group is set to report its full-year (FY21) results this Friday, August 6.
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