REA Group extends audience leadership to 5.7 M people each month

About REA Group Limited

REA Group Limited (REA or the Group) is a multinational digital advertising business specialising in property and is majority-owned by News Corp Australia, a subsidiary of News Corp. It operates Australia’s leading residential and commercial property websites, with its flagship site, realestate.com.au, being Australia’s number one property site. The Group also operates the data and insights business, PropTrack, and a leading mortgage broking business, Mortgage Choice. Internationally, REA holds a controlling interest in REA India and a significant minority stake in Move Inc., operator of realtor.com in the US. It also has a stake in PropertyGuru Group, South-East Asia’s leading PropTech company which operates in Singapore, Malaysia, Thailand, Indonesia and Vietnam.

Australian audience leadership now 5.7 million people each month

REA is experiencing 5.7 million people exclusively using realestate.com.au each month, making 127 million monthly site visits, being 70 percent more than REA’s nearest competitor.

Monthly buyer enquiries delivered to customers averaged 2.2 million in FY24. These strong numbers were boosted by the continued uplift in new listings in Melbourne, Sydney and Canberra in the June quarter. The increased volume of new listings was readily absorbed by healthy buyer demand which grew by 14 percent year-on-year in FY24. This increased buyer demand in the second-half year resulted in a decline in the median number of days for properties on site from 54 days in January 2024 to 36 days in June 2024.

Strong Australian FY24 Operational Performance

Core Australian FY24 revenue was up 22 percent year-on-year to $1,350 million. National Residential Buy listings were up 7 percent for the year, marked by a strong June quarter which recorded a 16 percent increase in listings nationally. Much of the increase was sourced from listings in Melbourne and Sydney which were up by 32 and 26 percent respectively in the June quarter.

The standout performer was the residential sector with Residential revenues up 25 percent to $996 million, followed by Commercial and Developer revenues which are up by 12 percent to $159 million. Financial Services operating revenues increased by 8 percent to $74 million while Media and Data direct revenue increased by 25 percent to $122 million.

At the Group level, Core Net Profit After Tax was up 24 percent to $461 million, while Reported Net Profit, after Significant Items of $159 million, was $302 million.  The major Significant Items relate to the $122.5 million impairment charge against the Group’s investment in Property Guru and the $26 million loss on revaluation of a 99 Group financial asset.

REA India is the number one property portal in India

REA India is the number one property portal in India and while revenue in FY24 was $103 million, it was up 31 percent on the $79 million recorded in FY23. India is the world’s most populous nation and is forecast to expand by 6.6 percent this year, driven by strong domestic demand and a surge in investment. This compares to forecast global growth of 2.6 percent and China’s expected growth rate of 4.8 percent in 2024. According to the recent World Bank Global Economic Prospects report, India will continue to be the world’s fastest-growing large economy.

Astute growth-seeking investors are drawn to REA’s exposure to India because it will continue to be the world’s fastest-growing large economy, at least in the near-term. India is set to displace Germany as the world’s 4th largest economy in 2025 after US, China, and Japan.  REA’s leading property market technology in a fast-growing country the size of India, is set to drive significant revenue and earnings growth over the long-term.

Real-time property data is currency

The key to rationalising REA’s relatively high price earnings ratio is to appreciate that real-time property data is currency and has an economic value for which consumers and professionals will pay valuable consideration. Raw real estate data is readily available, however packaged and presented in a way that facilitates informative decision-making makes it valuable to users. It is an essential tool for data dependent businesses like real estate agents, developers, homeowners and others who are prospective home buyers or people who have intent to refinance. Experienced investors value REA as an information bureau and with an overwhelmingly dominant market share, and subscription-based revenues, a high earnings multiple is justified.

Looking ahead

REA’s products and services are not people intensive and product innovation and service level, rather than low cost, is the primary source of competitive advantage. These business model features, combined with positive property market price sentiment, and REA’s dominant market share, should maintain positive earnings momentum, at least over the medium term.