Domain Holdings Australia Limited (ASX: DHG) is the owner of Australia’s second largest property portal business Domain.com.au.
Many investors questioned what the effect would be to Domain and REA Group Limited (ASX: REA) as the property market slows.
It seems we now have the answer for Domain.
Management will say at today’s AGM that total revenue is down 1% whilst digital revenue is up 6%. Pro forma total costs are around 7% higher.
The company outlined that digital and print revenues have been impacted by lower listing and auction volumes, particularly in Sydney and Melbourne. We’ve been seeing this trend with the monthly CoreLogic numbers that are reported.
In Sydney the number of new listings were down 8% and auction volumes were down 22%. In Melbourne new listings were down 1% and auction volumes were down 18%.
Domain also said that developer revenue has been affected by the lower levels of new development projects, particularly in New South Wales.
The combination of lower revenue and higher costs is likely to produce a sizeable hit to the reported profit. The property market is unlikely to turn around anytime soon, so Domain could be facing a tough FY19 and FY20.
Domain is currently trading at above 30x FY19’s estimated earnings. I think Domain operates in a good industry, but if it isn’t growing then I don’t think it’s worth considering at this point. If the valuation were to fall to a more reasonable level then it could be one to watch.
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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.