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Realestate.com.au Update

Realestate.com.au Update

In this week’s video insight Scott discusses REA Group and why it has been a core holding in Montgomery portfolios that has provided delightful returns for our investors.

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.

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2 Comments

  1. Hi Scott

    What are your views on today’s announcement of a $180 Million Goodwill write down on the Asian operations so soon after purchasing the balance of I Property ?

    Management see it as a “NON CASH” impairment charge/transaction but is it really ? If Goodwill was purchased with “CASH” then if you write down Goodwill purchased with “CASH” it’s like putting $180 Million worth of notes on the ground and setting fire to them. How then can they justify calling it a “NON CASH” charge/transaction when shareholder Equity is destroyed like that?

    It appears that I Property is shaping up to be a dud investment for the REA Group and it’s shareholders – they paid way too much for it from the start and sadly still have a $480 Million Debt owing on it. Maybe management also see the repayment of that Debt as a “NON CASH” charge/transaction.

    • Scott Shuttleworth
      :

      Hi Max,

      Well observed – whilst a write-down is called non-cash it typically reflects a realisation that actual cash paid in the past may have been put towards an investment which now might be valued at something less. A paper loss but a loss all the same.

      It’s worth considering however that the $180m write-down pales in comparison to the value of REA’s other business segments. The value of REA’s shares is not that dependent on what happens in Asia – more so Australia and hence this is where we spend most of our time looking.

      The announcement is disappointing – we can’t be flippant here. But there’s just more significant value drivers which are driving the value of the company over time upwards.

      All the best,
      Scott

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