MENU

REA Group Limited to acquire Hometrack Australia for $130 million

REA Group Limited (ASX: REA) announced after the market closed on Tuesday that it has entered into an agreement that it will acquire 100% of Hometrack Australia Pty Ltd, as long as the Australian Competition and Consumer Commission (ACCC) approves the deal.

Hometrack Australia is a residential property data company, it provides data to the financial sector. REA Group has a suite of products including property data analytics and insights, customised data platforms and an automated valuation model.

REA Group said that the purchase will cost $130 million and it will be funded from existing cash reserves and debt of $70 million.

The Hometrack Australia management team will continue under the leadership of Brendan Darcy and it will maintain its current structure and brand. Hometrack Australia is forecast to generate revenue of between $13 million to $15 million and earnings before interest, tax, depreciation and amortisation (EBITDA) of between $6 million to $7 million.

REA Group expects cost synergies to be achieved once Hometrack Australia is part of the REA business.

The CEO of REA Group, Tracey Fellows, said “It’s an exciting move for our business and a natural extension for realestate.com.au. The acquisition allows us to deliver more property data and insights to our customers and consumers.”

Foolish takeaway

The actual business seems like a good fit for REA Group, but the purchase price of $130 million for $7 million of EBITDA seems like a very high multiple to pay. Either management are very confident of synergies and growth, or it is just a high price. Hopefully it doesn’t turn out like its investment of iProperty where it had to write-down some of the value.

REA Group is currently trading at 38x FY18’s estimated earnings, it’s a high quality business but I wouldn’t want to buy shares at the current price – it’s just too expensive for me.

I’d much rather buy shares of these top businesses that are trading at much better value.

Top 3 ASX Blue Chips To Buy In 2018

For many, blue chip stocks mean stability, profitability and regular dividends, often fully franked..

But knowing which blue chips to buy, and when, can be fraught with danger.

The Motley Fool’s in-house analyst team has poured over thousands of hours worth of proprietary research to bring you the names of "The Motley Fool’s Top 3 Blue Chip Stocks for 2018."

Each one pays a fully franked dividend. Each one has not only grown its profits, but has also grown its dividend. One increased it by a whopping 33%, while another trades on a grossed up (fully franked) dividend yield of almost 7%.

The names of these Top 3 ASX Blue Chips are included in this specially prepared free report. But you will have to hurry. Depending on demand – and how quickly the share prices of these companies moves – we may be forced to remove this report.

Click here to claim your free report.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has recommended REA Group 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.

The 5 mining stocks we’re recommending in 2019…

For decades, Australian mining companies have minted money for individual investors like you and me. But if you believe the pundits and talking heads on TV, those days are long gone. Finito! Behind us forever…

We say nothing could be further from the truth. To earn the really massive returns, you’ve got to fish where others aren’t fishing—and the mining sector could be primed for a resurgence. That’s why top Motley Fool analysts just revealed their exciting new research on 5 ASX miners they believe could help you profit in 2019 and beyond…

Including:

The best way we see to play the global zinc shortage… Our #1 favourite large-cap miner (hint: it’s not BHP)… one early-stage gold miner we think could hit the motherlode… Plus two more surprising companies you probably haven’t heard of yet!

For free access to our brand-new research, simply click here or the link below. But be warned, this research is available free for a limited time only, and we reserve the right to withdraw it at any time.

Click here for your FREE report!