Trade Me Group Ltd faces battle with Facebook’s marketplace

Trade Me Group Ltd’s (ASX:TME) competitive position is under threat.

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Source; Trade Me

This week online New Zealand-based marketplace Trade Me Group Ltd (ASX: TME) reported its financial results for the six-month period ending December 31 2017. Below is a summary of the results with comparisons to the prior corresponding period, with all figures in NZ dollars.

  • Net profit of $46.1m, down 0.1%
  • Revenue of $122.7m, up 6.8%
  • EBITDA (operating income) of $79m, up 6%
  • Interim dividend of 9.1 cents per share
  • Earnings per share of 11.6 cents
  • Forecast for full year EBITDA and operating net profit growth at a lower rate than 2017

Trade Me is one of the most popular websites in New Zealand that splits its operations into a classifieds business that lets individuals or businesses advertise big ticket items such as cars, property, or jobs in a similar way to the likes of REA Group Limited (ASX: REA) or SEEK Limited (ASX: SEK) in Australia.

The classifieds business enjoyed a decent half, with revenue up 13.7% to $67.9 million. The car sales business performing especially well thanks to some recent investment in part.

The other operating division is a general marketplace that allows users to sell everyday goods like second-hand apparel, phones, homeware, electronics, boats, and everything in between. Revenue in this business was flat though and its previously dominant competitive position is now under threat from U.S. social network Facebook and its fast-growing marketplace offering.

Trade Me flagged more investment to protect its competitive advantage in 2018 and has already been investing heavily in an attempt to avoid losing market share to Facebook and its all powerful network effect.

The ASX-listed scrip is down 11.4% over the course of the past year, which reflects the big new challenge to the group’s competitive position as the rising tide of Facebook’s competition may prove impossible to beat back. As the US tech giants grow, I’m inclined to avoid Trade Me and Ltd (ASX: CAR) as they look the most vulnerable to disruption and market share falls.

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Motley Fool contributor Tom Richardson owns shares of Facebook Inc, REA Group Limited and SEEK Limited. You can find Tom on Twitter @tommyr345 The Motley Fool Australia has recommended Limited, REA Group Limited, and SEEK Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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