REA Group Limited (ASX: REA), the owner of realestate.com.au, this morning released a solid half-year report to the market.
Here are the key points:
- Revenue rose 16% to $337 million
- Profit rose 6% to $121.8 million
- An interim dividend of 40 cents per share was declared, up 11%
REA Group attributed the jump in revenue to its Australian residential business and the addition of iProperty, its Asian real estate listing business.
The advertising heavyweight said it increased Australian revenue substantially despite lower listing volumes thanks to its premium product suite.
"We've been able to deliver strong revenue growth in spite of lower listing volumes," REA Group CEO Tracey Fellows said. "We've done this through the success of our premium listing products and through innovations across our business."
The company was also quick to point out its advantages over its key competitor Domain, which is owned by Fairfax Media Limited (ASX: FXJ). The company said it commands more visits, page views and time on the site than Domain.
During the half, REA Group also launched Australia's first virtual reality app and introduced a number of new innovations, including a builder profile and seller hub. Flatmates.com.au and commercial also continued to show user growth.
The company's North American business closed the gap on its share of losses, reporting an operating loss of $1.8 million which was up from a loss of $4.6 million.
Commenting on the company's overall half, Ms Fellows said, "This is a strong result on the back of our continued focus to deliver great value for our customers and create unique experiences for our consumers."
Buy, hold or sell
REA Group has an impressive track record for growth. It is clearly the leader in online property listings locally. However, what's important to investors is the future. With Domain taking strides to close the gap and REA Group's listings falling but revenue rising (meaning a higher price was paid by its customers), investors should ensure that they are not overpaying for growth that may not come true.
Indeed, I believe REA Group has as number of strategies it can pursue to grow profits over the long-term, but those strategies do not guarantee success. For example, Asian and U.S. markets have not been anywhere near as successful as the local market.
Although I think REA Group will be a bigger and better business in the future, I'd say its shares are a hold today.
