This morning online real estate business Domain Holdings Australia Ltd (ASX: DHG) handed in its first set of full year results as a listed company. Below is a summary of the results with relevant comparisons to the prior corresponding year. Pro forma numbers represent results as if Domain was listed for the entire financial year.
- Total loss after tax and including significant items $29.6m
- Pro forma revenue of $357.3m, up 11%
- Ex-significant items pro forma EBITDA of $115.7m, up 12.5%
- Ex-significant items net profit of $52.9m, up 7.7%
- Ex-significant items earnings per share of 9.2c, up 7.3%
- Ex-significant items final dividend of 4c taking total dividends to 8c (50% franked)
- Appointed former Google exec Jason Pellegrino as incoming CEO after resignation of former CEO
- Warned on weak listings in Sydney over start to FY19
- Total costs are expected to increase high-single digits in FY19
- Digital revenue expected to benefit from new strategies like depth penetration
- The group has $188 million bank debt and more than $60 million cash in hand
Domain shares climbed 4% to $3.32 on the back of today's result as the group that is still part owned by Fairfax Media Limited (ASX: FXJ) delivers a reasonable start to life as a listed company.
Highlights included total revenue growth of 19% in the residential digital space, with depth listing revenues climbing 24% and equalling 82% of total revenue over the year.
Domain also reported it is closing the gap in terms of total residential listings with its rival realestate.com.au which is operated by REA Group Limited (ASX: REA) and majority owned by Fairfax rival New Corp (ASX: NWS).
In effect Australia's two leading property portals now operate a duopoly which is a positive for both, although REA Group is rated higher by investors for its growth potential.
Domain is currently paying out around 87% of earnings as dividends for example which doesn't leave much cash left over for investment, while REA Group traditionally pays not much more than 50% of profits in dividends as it reinvests for the future and to maintain its competitive position.
At $3.32 Domain stock is changing hands for 36x FY 2018's earnings per share and looks expensive given its growth rates. Moreover its outlook for high-single-digit cost growth alongside flaccid listing volumes and house price growth doesn't paint a 36x earnings picture for FY 2019.
On top of this the recent resignation of the CEO hardly inspires confidence in the business as an investment prospect.
Still it does enjoy some digital tailwinds and has a reasonable market position as part of an effective duopoly. The stock looks a little expensive to me and as such I'd prefer to look elsewhere for investment opportunities.
