What to expect from REA Group?
Yesterday we attended Citi Group’s ‘Fireside discussion’ with Tracey Fellows, CEO of REA Group Limited (ASX: REA).
Below we share a few noteworthy points from the conversation.
- REA has established a relationship with Australian Finance Group Limited (ASX: AFG) in order to provide leads for mortgages in each for up-front and trailing commissions. Tracey noted that it’s the largest upcoming opportunity in REA’s portfolio.
- REA it expecting no impact on revenues as a result of housing price movements going forward (whether up or down). Largely, REA revenues are more driven by the demand of consumers to get a property sold. Should Australia go through tougher economic times, digital advertising is more likely to be favoured relative to print.
- REA ad prices are due to be reviewed in February 2016. The propensity for increases is to be a function of how much value each ad provides (from the perspective of the quantity and quality of leads provided to agents).
We expect REA to do relatively well in the first half. We’ve previously shared Morgan’s count of REA ad listings and provide the updated chart below.The Montgomery Fund, the Montgomery [Private] Fund, Montaka Global Fund and the Montgomery Global Fund hold positions in REA Group Limited.
Scott Shuttleworth is an analyst at Montgomery Investment Management. To invest with Montgomery domestically and globally, find out more.
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