REA Group: 3Q16 Result
REA Group (ASX: REA) has reported a 20 per cent increase in revenue in the third quarter. We summarise the key points in this blog post.
KEY METRICS
- 3Q16 Revenues $147m (+20% you) benefited from IPP consolidated into REA results from 1 February
- 3Q16 Opex $69m (+21% yoy)
- 3Q16 EBITDA $77m (+18% yoy)
HIGHLIGHTS
- 9mth group revenues +20% yoy to $461m, EBITDA +25% to $263m
- 3Q revenue growth of +20%
- 3Q16 cost growth accelerated to +21% (1H: +10%). Higher costs from marketing spend & strategic initiatives not a market surprise
OTHER COMMENTS
REA introduced a price rise from July in the range of 10%-15 %, which beat some analyst expectations and confirms the pricing power of the model and reinforces our thesis of being able to ultimately take a larger share of the total real estate market spend pie.
Encouragingly, REA also confirmed that despite investing aggressively, further EBITDA margin expansion in Q4 should be expected because marketing costs will be lower in the fourth quarter.
The US business “Move Inc” is now EBITDA positive.
Our REA Valuation is currently $65.00, this compares with analysts we know who have price target/valuations between: $52.19 and $56.50.
The Montgomery Private Fund, The Montgomery Fund, the Montgomery Global Fund and Montaka each hold a position in REA Group Limited.
Roger Montgomery is the founder and Chief Investment Officer of Montgomery Investment Management. To invest with Montgomery domestically and globally, find out more.
Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.
He is also author of best-selling investment guide-book for the stock market, Value.able – how to value the best stocks and buy them for less than they are worth.
Roger appears regularly on television and radio, and in the press, including ABC radio and TV, The Australian and Ausbiz. View upcoming media appearances.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
