Why is the McGrath share price surging?

Shares in the real estate company have rocketed higher at the open after it reported a significant earnings uplift. McGrath expects underlying earnings before interest, tax, depreciation and amortisation (EBITDA) to be in the range of $16.5 million to $17.5 million.

For context, McGrath's FY2020 underlying EBITDA totalled just $3.7 million. The McGrath share price is responding positively following this morning's update. It comes after a bumper half-year result and McGrath's advice that it expects strong trading conditions to persist in the second half.

McGrath reported half-year underlying EBITDA of $6.6 million, up from $1.6 million in 1H 2020. The positive momentum behind that result has persisted in the third quarter, giving rise to the higher forecasts for McGrath's full-year earnings.

A strong Aussie housing market has been a key factor in the significant earnings upgrade. McGrath said the residential property market has seen a number of positive indicators in recent times. Those include rising national home values, strong sales volumes and strong new household borrower commitments.

The McGrath share price has shot higher at the open following this morning's update. McGrath CEO Eddie Law said, "The combination of improving business and consumer sentiment, record low interest rates and lower stock levels in the market, has driven strong price growth in recent months".

Investors have clearly been buoyed by this morning's news. Strong business performance and favourable conditions have shareholders buying strongly on Monday morning.

The McGrath share price has been charging higher in the last 6 months. Prior to this morning's open, the Aussie real estate shares were up 140.7% to 65 cents per share since 27 October 2020. But today's news has resulted in a further 7.69% gain to see the company's shares currently trading at 70 cents.

Foolish takeaway

The McGrath share price is on the move after the company significantly boosted its forecast underlying EBITDA figures for FY2021.

The post Why the McGrath (ASX:MEA) share price is surging 8% appeared first on The Motley Fool Australia.

Why is the McGrath share price climbing?

The McGrath share price is lifting after an update on its Oxygen Home Loans business (Oxygen). According to the release, the group has entered into a transaction "that will deliver enhanced scale and optimisation" of the Oxygen business.

Oxygen has raised an additional $2.5 million via a cash injection from a consortium. The consortium led by Doc Klotz, Ben Taylor and Sturt Capital Partners, will take a 55% controlling interest in Oxygen.

McGrath will reduce its interest in Oxygen to a 45 per cent shareholding in the hope of propelling further growth. The Aussie property group will also receive a cash payment in three years of $1.8 million.

The McGrath share price has jumped higher on the back of yesterday's announcement. At the time of writing, shares in the property management group were trading at $0.65 per share.

McGrath will enter a referral agreement with Oxygen and retain one of three board seats. McGrath CEO Eddie Law said the transaction can "unlock the significant potential the merged business will deliver across our platform".

"A more simplified process of writing loans will make it easier for our sales agents to facilitate mortgage delivery to buyers", he added.

The McGrath share price has performed strongly in 2021, climbing 39.1 per cent year-to-date through to Tuesday's close. That is a significant outperformance over many of its peers and well above the 2.6 per cent gain for the All Ordinaries Index (ASX: XAO).

At the time of writing, McGrath has a market capitalisation of $106.7 million and is trading at an 11.1 price to earnings (P/E) ratio.

Foolish takeaway

The McGrath share price has jumped higher in early trade following a late afternoon announcement yesterday.

McGrath will reduce its shareholding in Oxygen Home Loans while retaining a controlling stake and board seat.

The post Why the McGrath (ASX:MEA) share price is climbing today appeared first on The Motley Fool Australia.

The surge comes after the real estate services company reported its half-year results for the period ended 31 December 2020 (1H FY21).

Strong financials send McGrath share price soaring

McGrath reported revenues for the period totalling ~$56.8 million for 1H FY21. This is a 16% gain compared to the ~$48.9 million reported for the period ended 31 December 2019.

Across the half, company owned sales were a major factor in performance. McGrath advised that there was a 22% increase in the number of properties sold and a 7% increase in the average sales price.

The business earned a net profit after taxes (NPAT) for the period of $8.1 million, compared to a $1 million loss reported in the first half of FY20.

The company's underlying earnings before interest, tax, depreciation and amortisation (EBITDA) blew up a massive 317% compared to the prior corresponding period (pcp). Underlying EBITDA for this half was ~$6.6 million, compared to ~$1.6 million in the pcp. 

This underlying EBITDA result is at the top end of the guidance that McGrath provided on 26 November 2020.

The company also announced a fully franked interim dividend of 5 cents a share.

CEO commentary

Reflecting on McGrath's results amid the challenges of COVID-19, CEO Eddie Law said:

The residential property market has proved to be very resilient during the ongoing COVID-19 pandemic, compared with other sectors.

Cashed up homeowners, many of whom are prevented from travelling either domestically and internationally, are now largely working from home and as such, are reassessing their lifestyle and surroundings. This is positive for our industry as it results in homeowners either transacting or improving the asset value of their current home.

Despite a challenging year navigating the various lockdowns, McGrath has demonstrated our ability to continue to transact successfully and efficiently should further COVID restrictions are deemed necessary in the future.

We are very pleased as foreshadowed at the AGM, to return to the payment of dividends to shareholders as the business continues to recover and grow.

McGrath share price snapshot

McGrath has a current market capitalisation of $95.9 million. There are 166.8 million shares outstanding.

The McGrath share price zoomed as high as 74 cents during trading today, the highest price it has been since 11 September 2017. Year-to-date, McGrath shares are now up by 43%.

The post Why the McGrath (ASX:MEA) share price popped 14% today appeared first on The Motley Fool Australia.

Why is the McGrath share price on watch?

McGrath recorded a strong turnaround in profitability during FY 2020, with underlying earnings before interest, taxes, depreciation and amortisation (EBITDA) of $3.7 million recorded. This compared with a loss of $6.4 million recorded in FY 2019. However, it should be pointed out that this year's result did include $2.2 million worth of government grants related to COVID-19.

McGrath also managed to recorded a solid 11% increase in revenue to $91.69 million for the full financial year. In addition, the group recorded an impressive 31% increase in sales per agent for the 12 month period. This result was achieved despite the negative impact of the coronavirus pandemic on the wider Australian residential property sector during the fourth quarter. 

Solid balance sheet

McGrath ended FY 2020 with a strong balance sheet. It had no debt on its books as at 30 June, and had $17.3 million of cash in hand. McGrath estimates that its rent roll was worth around $52.2 million at this time. $38.5 million of this amount the company noted, was not reflected on the balance sheet.

What contributed to McGrath's improved performance?

Investors will be watching the McGrath share price closely this morning after the company announced its turnaround followed a series of strategic moves implemented during FY 2020. The company's headquarters was moved to a new technology hub in Pyrmont. Also, a new CRM system was rolled out across McGrath's nationwide company-owned and franchised offices, and a new website was launched. In addition, McGrath successfully acquired four company-owned offices, which complemented new franchise offices that were added during the year.

McGrath management commented on the results stating, "We are pleased with the $10 million turnaround, a return to after-tax profit and further strengthening of our balance sheet with $17.3 million in cash. Our business performed significantly better than the market during the year and we have a strong platform on which to build in 2021, notwithstanding the ongoing impacts of COVID."

What's next for the McGrath share price?

During FY 2021, McGrath will look to further consolidate its nationwide operations while focusing on further recruitment of suitable agents. There will also be a strong focus on further improving cost control and updating legacy systems.

McGrath did not provide revenue guidance. However, the group noted that it expects to see a decline in residential property prices over the coming months. Government support and record low interest rates, the company noted, are anticipated to minimise this trend. Also, McGrath anticipates some softness in rental yields throughout FY 2021.

The McGrath board decided to not pay an FY 2020 dividend due to the uncertain economic environment surrounding COVID-19.

The McGrath share price was trading at 19 cents at the market's close on Friday. Whilst having recovered 18.8% from its March low, the McGrath share price is still trading 50% lower than its 52-week high.

The post Mcgrath share price on watch after strong FY 2020 earnings release appeared first on The Motley Fool Australia.

I believe this exposes two core truths about the Australian fintech sector in 2020. First, the BNPL sector, or pay by instalments, is no longer revolutionary in Australia. And second, all of this and more is due to the failure of the big four Australian banks.

The failure of the big four

The big four banks are fundamentally mortgage providers, with business loans and digital payments thrown in. They have been woeful at defending their turf. For instance, by population Australia is a small country, dominated by four large banks protected by legislation. So how on earth did Tyro Payments Ltd (ASX: TYR) become the fifth largest merchant acquiring bank, after the big four, by number of terminals? Moreover, bank lending to households via credit cards has been falling significantly since 2002. The Australian aversion to consumer debt has been growing for almost two decades. So why didn't any of them come up with Afterpay Ltd (ASX: APT)? 

The Moneyme share price isn't the only one to benefit by being more accessible, user friendly and offering cheap pricing. To paraphrase Paul Keating, every pet shop galah has an opinion on fintech shares these days. Companies like CML Group Ltd (ASX: CGR) provide cashflow solutions to small and medium sized companies through innovative debtor finance platforms. Additionally, lenders such as WISR Ltd (ASX: WZR) provide short term personal finance, while RAIZ Invest Ltd (ASX: RZI) is helping the public to save money.

It is almost like watching the death of Borders Bookstores again after the rise of Amazon.com (NASDAQ: AMZN). Consequently, given that the big four banks have allowed these spaces to open up, what does this mean for Moneyme?

Is the Moneyme share price sustainable?

In my view, there is not a chance that the company's share price is sustainable. Not in the medium term anyway. It announced it had acquired 55 merchants. Zip Co has 23,600. Moreover, its most similar payments competitor, Tyro, has 32,000 Australian merchants. Not only that, but a BNPL service is something Tyro could quickly open up at the point of sale.

Furthermore, the Commonwealth Bank of Australia (ASX: CBA) is already doing so slowly via its part ownership of Klarna, the world's largest BNPL company. To illustrate further just how competitive this sector is now, the Splitit Ltd (ASX: SPT) model of working with the large credit cards, to break down payments into instalments, is also likely to eat into market share. 

Foolish takeaway

The Australian buy now, pay later sector has become crowded to the point of normalcy. Accordingly, I believe the spike in the Moneyme share price is irrational optimism, not a sustainable valuation. Additionally, this is without considering the impacts of inevitable Australian regulation, and a raft of unlisted companies.

I think there are plenty of other growth opportunities in the fintech sector generally. However, within the BNPL sector, I believe it is now a race for the United States market. The startup companies that can establish a beachhead in that $5 trillion retail market are the ones that will survive this modern day gold rush.

The post MoneyMe share price surges, but is it sustainable? appeared first on The Motley Fool Australia.

People are selling shares. Panic buying of toilet paper and non-perishable food has been a feature so far. Some investors are now concerned that Australia and its banks could face a rough time over the next 12 months. Will Australian property be next?

The CoreLogic monthly result for February 2020 showed another month of overall gains for the national Australian property market. Nationally, in February house prices grew by another 1.1%. Sydney house prices went up 1.7% and Melbourne house prices grew 1.2%. Most of the other cities, except Darwin, saw a gain during February 2020. 

However, there are now reports that high-end property deals are starting to fall through. Buyer agents in Sydney and Melbourne are seeing sellers take offers that are close to the asking price, rather than trying to maximise the selling price.

Buyers are not turning up to auctions when they were expected to because of fear of the coronavirus. Numbers of foreign buyers and their agents have declined. I don't blame them!

The worry is that the coronavirus could cause a (technical) recession in Australia, which would likely lead to rising unemployment and probably falling house prices. Sydney is the city that's facing the largest outbreak in Australia, but all Australian states may be affected.

What shares would be affected? Well a recession would affect most areas of the economy, but I'm not thinking there will be a painful recession. But falling property prices would be unfortunate for all shares related to property including Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), REA Group Limited (ASX: REA), Domain Holdings Australia Ltd (ASX: DHG), CSR Limited (ASX: CSR) and Mcgrath Ltd (ASX: MEA).

The post Will the coronavirus cause a property market crash? appeared first on The Motley Fool Australia.

It started today with another fall of almost 3%. But by the end of the day the ASX 200 only finished down by 0.8%, meaning it recovered by around 2% between midday and the close of trade.

Why was the ASX so volatile today?

The coronavirus spread further over the weekend with deaths in Australia and the US. Italy continued to see cases rise, the Louvre in Paris closed, the news keeps coming. But investors are looking to the Reserve Bank of Australia (RBA) to save the week with a rate cut tomorrow and perhaps the US Fed will cut too.

The ASX still ended in the red, but the rout has at least been slowed to a 'normal' decline of less than 1%, rather than another shocker.

Property prices rose again

Nationally, in February house prices grew by another 1.1%. Sydney house prices went up 1.7% and Melbourne house prices grew 1.2%.

Melbourne, Brisbane, Adelaide, Hobart and Canberra are now at their all-time high prices. However, Sydney is still 3.7% below its all-time high whilst Perth and Darwin are 21% and 32.7% lower than their peak prices.

Property businesses still saw red because of the market decline, but some of them perked up after the CoreLogic numbers were released.

The REA Group Limited (ASX: REA) share price finished 1.4% lower and the Domain Holdings Australia Ltd (ASX: DHG) share price declined 2.8%, but the Mcgrath Ltd (ASX: MEA) share price ended flat – which is fairly good on a day like today.

Mixed returns

It still was a rough day for some resource businesses like Fortescue Metals Group Limited (ASX: FMG) which dropped 9% and Resolute Mining Limited (ASX: RSG) which fell almost 8%.

However, at the opposite end of the ASX we had shares like logistics software business WiseTech Global Ltd (ASX: WTC) seeing a share price rise of 12.7% and tech company Appen Ltd (ASX: APX) went up 7.1%.

The post ASX 200 dips and then rebounds in wild start to week appeared first on The Motley Fool Australia.

The Corelogic February 2020 Home Value Index Results were released this morning and give us a good picture of what happened across the country last month.

The house price movements

Nationally, in February house prices grew by another 1.1%. Sydney house prices went up 1.7% and Melbourne house prices grew 1.2%.

Over the month, the house prices of Hobart, Canberra and Brisbane went up 0.8%, 0.8% and 0.6% respectively. Perth and Adelaide house prices also grew by 0.3% and 0.1% respectively. The only city to register a decline was Darwin, which dropped a further 1.4% in a single month.

On an annual basis, Sydney and Melbourne moved back into double digit growth rates.

Melbourne, Brisbane, Adelaide, Hobart and Canberra are now at their all-time high prices. However, Sydney is still 3.7% below its all-time high whilst Perth and Darwin are 21% and 32.7% lower than their peak prices.

Regional areas saw an increase of house prices by 0.7%, slower than the capital cities but still saw good growth.

CoreLogic head of research Tim Lawless said: "The primary factors driving this rebound remain in place and include an extremely low cost of debt and improved borrowing capacity. However, considering the sluggish pace of household income growth, housing affordability is eroding rapidly which is likely to see some parts of the market become less active."

What about share prices?

The monthly movement of house prices is not at the top of investor minds. The fallout of the coronavirus is causing the biggest effect. 

The share price of Commonwealth Bank of Australia (ASX: CBA) is down 3%.

The REA Group Limited (ASX: REA) share price is down 3.2% and the Domain Holdings Australia Ltd (ASX: DHG) share price is down 3.3%.

The share price of CSR Limited (ASX: CSR) is down 3.1%.

The share price of Brickworks Limited (ASX: BKW) is down 3.4%.

However, the Mcgrath Ltd (ASX: MEA) share price is up 1.8%, showing that there can be some positives in the selloff.

It will be interesting to see what happens with property over March and the next few months.

The post What are Australian house prices doing during the coronavirus plunge? appeared first on The Motley Fool Australia.

In afternoon trade the real estate services provider's shares are up almost 10% to 34 cents.

Why is the McGrath share price zooming higher today?

Investors have been fighting to get hold of the company's shares following the release of a greatly improved half year result.

During the first half of FY 2020, McGrath reported a 15% increase in revenue to $48.9 million. This was driven by an uplift in market sentiment and stronger clearance rates which offset softer listing numbers compared to the prior corresponding period.

Things were even better for its EBITDA. McGrath recorded positive EBITDA of $1.6 million for the half, up from an EBITDA loss of $2.5 million a year earlier.

It was a similar story on the bottom line, with the company recording a loss of $0.98 million, compared to a $9.6 million loss in the prior corresponding period.

Management advised that this turnaround was a reflection of the company's initiatives impacting its bottom line. These initiatives include growing its footprint through three acquisitions and organic growth, optimising its company owned portfolio by consolidating unprofitable offices, and its investment in its Marketing and Technology (Martech) strategy.

In addition to this, it notes that over 32 real estate professionals who had previously left the company, have returned over the last 18 months.

Geoff Lucas, CEO of McGrath said: "I'm pleased to say that in the face of what has been a challenging property environment, our focus on talent development, improved customer service the execution of our strategy has allowed us to achieve solid results this half. Our Company owned sales division in particular has benefited from improved agent productivity and has contributed a strong uplift in revenue. As the market conditions improved in Q2 of FY20, we were well placed to capitalise on these positive tailwinds."

"We have seen a strong start to activity in January 2020 with an increased number of vendors who have gone to market early and benefitted from strong demand and continued rising values during the last quarter of CY2019. We believe this will have a positive impact on vendor sentiment for the second half," Mr. Lucas added.

Outlook.

Mr Lucas advised that improved market conditions from the end of 2019 have continued into 2020. This has seen strong clearance rates, fewer days on the market, and healthy buyer demand.

And while listing volumes remain below the prior year, this is continuing to contribute to stock shortage and solid price gains.

In light of this, management expects the turnaround of the business to continue in 2020, which will "manifest in the FY 2020 full year results."

The post Why this small cap ASX share is zooming 10% higher today appeared first on The Motley Fool Australia.

Four shares that have not let this hold them back are listed below. Here's why they are charging higher:

The Chorus Ltd (ASX: CNU) share price is up 5.5% to $6.41 following the release of the New Zealand based telco company's half year results. Although Chorus delivered a small decline in revenue to NZ$483 million, its EBITDA rose 4.4% to NZ$332 million. Looking ahead, thanks partly to the company's progress with its fibre network rollout, management has increased its FY 2020 EBITDA guidance. It now expects EBITDA of NZ$640 million to NZ$655 million, compared to previous guidance of NZ$625 million to NZ$645 million.

The Mcgrath Ltd (ASX: MEA) share price has zoomed almost 10% higher to 34 cents following its half year results release. The property company reported a 15% increase in revenue to $48.9 million and positive EBITDA of $1.6 million. This compares to an EBITDA loss of $2.5 million in the prior corresponding period.

The Ramelius Resources Limited (ASX: RMS) share price has raced 12% higher to $1.42. This follows the release of the gold miner's half year update this morning. Ramelius reported a 329% increase in net profit to $20.5 million and a 31.8% increase in earnings before, interest, tax, depreciation and amortisation (EBITDA) for the six months ended December 30. This was driven by improving grades and a rise in the gold price.

The Saracen Mineral Holdings Limited (ASX: SAR) share price has jumped 7% to $4.48. Investors have been buying Saracen and the rest of the gold miners following the broad market selloff on Monday. This increase in demand for safe haven assets has led to the S&P/ASX All Ordinaries Gold index rising by an incredible 3.9% this afternoon.

The post Why Chorus, Mcgrath, Ramelius, & Saracen shares are charging higher appeared first on The Motley Fool Australia.

According to the data, Australian national dwelling prices rose by 0.9%. In a very positive update for the country, every capital city recorded an increase in price. Indeed, every regional area (except regional South Australia) saw dwelling price growth as well.

This is a sign that the property market recovery which started in Sydney & Melbourne in mid-2019 has now spread to the whole country.

Australia's biggest property markets, Sydney and Melbourne, saw price growth of 1.1% and 1.2% respectively over the month. Hobart house prices went up by 0.9% and Brisbane saw prices go up 0.5%.

Looking at the other cities, Canberra prices rose 0.3% and Adelaide prices went up 0.2% whilst Perth and Darwin both saw growth of 0.1%. That's not much of an increase, but Perth and Darwin have seen years of declines, so a slight increase is welcome.

Brisbane, Adelaide, Hobart and Canberra house prices are now the highest they've ever been, but Sydney is still 5.4% lower than its peak and Melbourne is 1.2% lower than its peak.

What about ASX shares?

Worries about the coronavirus are distorting what property shares may have done on a normal day. But, let's take a look:

The REA Group Limited (ASX: REA) share price is down 1.7%.

The Domain Holdings Australia Ltd (ASX: DHG) share price is down 0.5%.

The McGrath Ltd (ASX: MEA) share price is flat.

The Stockland Corporation Ltd (ASX: SGP) share price is down 0.5%.

The Brickworks Limited (ASX: BKW) share price is down 0.3%.

The Commonwealth Bank of Australia (ASX: CBA) is down 1%.

Foolish takeaway

Property seems like it will have a positive year in 2020, though there's a good chance that growth will slow as affordability becomes a limiting factor again.

The post House prices up in January (but growth slows), which ASX shares to buy? appeared first on The Motley Fool Australia.

Banks like Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), Australia and New Zealand Banking Group (ASX: ANZ) and National Australia Bank Ltd (ASX: NAB) want to lend as much as possible.

Real estate agents like Mcgrath Ltd (ASX: MEA) want buyers to pay as much as possible for a property.

House prices are surging at the moment with investors and first home buyers suffering from FOMO. National house prices rose 1.7%, Sydney house prices rose 2.7% and Melbourne house prices increased by 2.2% in just November 2019 alone.

But home buyers should be careful about what they get themselves into. A mortgage is for 30 years, not just one or two years. It needs to be affordable for the entire period. 

Monthly Repayments 

Each household needs to ultimately decide what level of debt they're willing to sign up for. But there are some general guidelines which you can follow. It's generally a good idea to limit the mortgage payment and other property expenses to a max of around 30% of the monthly budget, 25% (or less) of the budget would be a more comfortable number.

With interest rates being so low you need to give yourself a bit of a buffer in-case rates rise. If your loan repayments are based on a 3% or 3.5% interest rate your budget should be able to cover the repayments if interest rates rose and sent the cost to 5% or 5.5%.

Total mortgage 

But, taking on debt is more than just the monthly repayment. Aussies are perhaps the most indebted country in the world with huge mortgages. Debt isn't just a made-up number, we need to eventually pay all of that debt back.

How much debt do you want to take on? Banks have their own limits of how much debt they're willing to lend compared to the borrower's income. So even if you want to borrow 20 times your income you'll be faced with the bank's own ratio limit. 

Taking on a $500,000 mortgage is much riskier for someone with $50,000 of annual income compared to someone with $100,000 of annual income. I think a debt to income limit of six to one is probably a decent idea with interest rates being so low, but it could be lower in regional areas and may need to be higher in Sydney.

Do you have to buy a house?

There's nothing to say that people must buy a property to live in. Some people are priced out of the property market, but long-term renting isn't all bad. Annual property expenses are lower, at least for the medium-term before inflation catches up. If the renter invests a lot into shares then their net worth may be able to keep up. Rent money may be dead money, but interest, building insurance, water rates, council rates and (if applicable) body corp fees are also 'dead money'.

The post How much should you borrow to buy a house? appeared first on The Motley Fool Australia.

On an adjusted basis net profit after tax before amortisation (NPATA) & significant items came in at $486 million, but that's still down 6 per cent on the comparable amount in fiscal 2018.

Boral's CEO, Mike Kane, blamed soft new housing starts in Australia and the US as confidence in property markets sagged. "Our business is not immune to market cycles, or adverse weather, and in response to softer market conditions and extreme rainfall events in the US, we have delivered tangible benefits this year through improvement initiatives and cost reduction programs, with more expected in FY2020." 

The final straw for investors though was actual guidance for FY 2020 profit before significant items to be some 5% to 15% lower on a disappointing FY 2019. 

Other groups to blame weak property markets for poor results recently include realtor Mcgrath Ltd (ASX: MEA), builder Adelaide Brighton Ltd (ASX: ABC) and home loan giant the Commonwealth Bank of Australia (ASX: CBA). 

The post Why the Boral share price cracked today appeared first on The Motley Fool Australia.

• Revenue of $82.7m, down 17%
• Net loss after tax of $15.6m, including $3.4m in impairments
• EBITDA loss of $10.1m
• EBITDA loss of $6.4m backing out one-off 'onerous contract expense'
• Diluted loss per share 9.33c
• No final dividend
• Sales volumes in key Sydney market down 21.9%
• No debt and $10.3m cash on hand
• Net tangible assets per share of 43c

The Sydney focused real estate agent blamed the weak result on challenging residential property markets over the fiscal year with McGrath reporting sales and price volumes were down 17.5% and 6.9% respectively over the fiscal year.

In Sydney its CEO suggested listing volumes were at a "decade low" or down around 30% on historical levels.

McGrath earns fees on property sales and its rental roll primarily, with the tough conditions meaning its working to cut costs and win market share through a rocky period. 

The post Results: The McGrath share price is now down 88% since its IPO appeared first on The Motley Fool Australia.

The theory that the bottom could be in for house prices in general is no secret, after the surprise federal election win for the Coalition and amid mounting expectations that the Reserve Bank is readying to cut lending rates to 1% or lower over the 12 month ahead.

Elsewhere the prudential regulator APRA has loosened important lending restrictions on the banks and property investors recently.

Overall then you'd be forgiven for thinking it could be time to pile into the property market.

While it seems investors in three residential-property leveraged ASX companies are thinking along the same lines.

Shares in real estate agent Mcgrath Ltd (ASX: MEA) are up 9% to 29 cents today despite no news coming out of the loss-making real estate agent.

While the valuations of Australia's dominant two residential property sales internet platforms have also raced higher recently.

Today Domain Holdings Australia (ASX: DHG) shares are up 2.5% to $3.39 and up 22% over the last month despite the operator of domain.com.au releasing no specific news to the market.

While shares in REA Group Limited (ASX: REA) are also up over 12% over the past month as investors bet on residential property listings rising.

The post 3 ways share market investors are betting house prices have bottomed appeared first on The Motley Fool Australia.

The CEO warned that for the eight months to 28 February 2019 the group made a $4.5 million EBITDA loss, with trading conditions in March 2019 also "below expectations".

McGrath also warned transaction volumes remain 20% below the prior year in both Sydney and Melbourne with Sydney home values down 10.4% on the prior year.

The group blamed the poor result on the federal and state elections creating uncertainties in NSW, alongside sellers failing to adjust the reality of the market in their price expectations.

Worryingly for McGrath and property bulls generally is the reality that the Reserve Bank now has little room to ease lending rates, with its cash rate already sitting at a historic low of 1.5%.

On the bright side the CEO did flag that McGrath's rentals business continues to perform well, while its balance sheet is in reasonable shape with no debt and $14.3 million in cash.

Elsewhere, real estate classifieds business REA Group Limited (ASX: REA) is also suffering a tough 2019 on the back of warnings over listing volumes falling in Melbourne and Sydney.

The post McGrath share price tanks as it warns Sydney's house prices are still falling appeared first on The Motley Fool Australia.

• Revenue of $42.5 million, down 18%
• Statutory loss of $9.6m
• Adjusted net loss of $3.3m, compared to $1.8m
• Underlying EBITDA loss of $2.5m, down from $1.6m
• Q2 underlying EBITDA loss of $600k, versus $1.9m in Q1
• No debt and $16.5 million cash on hand

This was another disappointing result for the Sydney-focused estate agent and leasings manager with around $3 million in "one-off" costs being incurred over the half being related to an "onerous contract" for its CRM sales management tool.

An additional intangible asset impairment of $3.4 million was recognised as a result of software development costs previously capitalised.

Companies can expense or capitalise software development costs with the effect of capitalising being an accounting sleight of hand that artificially inflates profit as costs are not taken in full straight away as if expensed.

However, the bottom line is that the cash cost has to come out of the profit and loss statement over time if not immediately.

These kind of large additional IT costs are the last thing needed in the face of Sydney's fast-falling house prices, as listings also fall and rental vacancies turn higher.

McGrath's CEO claimed "settled sales" for Sydney were down 20.3% over the period and 13.3% down nationally in a result to hurt the earnings of estate agents nationally.

Outlook

The problem for bargain hunters eyeing up McGrath's 26 cents share price is that its CEO warned EBITDA guidance for the second half of FY 2019 may have to be downgraded due to challenging property market conditions, lower listings, average selling prices, and an expectation that they're unlikely to improve due to a number of factors including upcoming NSW and Federal elections.

Uh oh, when the estate agent's own CEO is warning on property market conditions you know they must be tough, as usually agents like to talk up the market no matter what.

McGrath shares IPO'd at $2.10 in December 2015 near the peak of the Sydney property bull market in an outcome that richly rewarded the insiders that sold significant stakes in the business.

Since then share price has lost 88% of its value and is likely to tread water until we see a return to stronger property markets and a lessening of what is ferocious and margin-eating competition among different agencies.

The saving grace is a decent balance sheet with no debt and $16.5 million cash in hand.

The post Even the McGrath CEO is panicked by the Sydney property price outlook appeared first on The Motley Fool Australia.

Revenue for the half-year was down 18% to $42.5 million as the faltering residential real estate market continues to make trading conditions challenging. McGrath reported lower sales numbers coupled with a lower average sale price as it struggled to maintain profitability in a declining market.

Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) of -$2.5 million was in line with management guidance for 1H19 as the Company Owned Sales segment was the primary contributor to the 254% decline from last year's $1.6 million EBITDA.

Underlying net loss after tax came in at -$3.3 million, down from a $1.8 million underlying net loss in 1H18. The company said that the soft profit results were the result of adverse impacts of impairment and onerous contracts relating to its revamped IT strategy alongside other tax adjustments.

Almost all sectors saw revenue declines from prior corresponding period, with Property Management the exception, up marginally to $9.5 million from $9.4 million in 1H18. The company saw negative EBITDA numbers in its Co-Owned Sales, Corporates and Other segments for the year as the Sydney housing market downturn hit particularly hard.

So what's the verdict?

I'm staying well away from residential real estate in my exposure for the moment. With weakening economic data coming out from the RBA, as well as signs of asset valuation weakness from the Australian real estate investment trusts (A-REITs), I think McGrath has further to fall.

The company's share price closed at $0.26 per share on Friday which is the result of several years in steady decline. I haven't seen much in this latest update to see signs of improving profitability and would be looking towards countercyclical or non-cyclical stocks such as AGL Energy Limited (ASX: AGL) or Wesfarmers Ltd (ASX: WES) in the meantime.

The post McGrath share price set to fall on limp half-year earnings appeared first on The Motley Fool Australia.

Nick Scali Limited (ASX: NCK)

Less home purchasing means fewer homes to fill with furniture – and that's bad news for the likes of furniture retailer Nick Scali Limited.

If you're a fan of the buy on a low, sell on a high adage, now would not look like the time to dump your Nick Scali stocks – with its share price down 0.5% to $5.31 at the time of writing – dropping back from $6.60 at this time last year.

But with the lagging sales in the housing market across the eastern states tipped to continue, it's likely going to be 1-2 years before Nick Scali shares start to show much value for shareholders.

Nick Scali reported reasonable results back in August for FY18, with revenue up 7.7% and NPAT up 10.1%, but its strategy to roll out a succession of new stores could be a real concern if people aren't buying up homes to fill with its furniture.

It would be prudent for Nick Scali to put such plans on hold, but it will remain to be seen what steps the household-name retailer takes to mitigate the housing market downturn.

It would seem an unnecessary risk to expand right now given the overall market, so shareholders will need to decide if they want to bail out or hang on to weather the storm.

Domain Holdings Australia Ltd (ASX: DHG)

It's been a tough few months for real estate selling platform Domain Holdings Australia Ltd – with its share price sitting at a 52-week low at the time of writing at $2.50.

Aside from some decent movement in mining towns, Australia's plunging property market is not good news for the platforms where properties are advertised, such as Domain.

And with a Domain article recently stating 8.9% of mortgaged Australians have negative equity, the situation looks dire.

Domain's share price took a sharp dive in early October after the release of a trading update reporting total revenue was down 1% as pro forma total costs had risen 7%.

The silver lining was a rise in digital revenue of 6%, but with an outlook suggesting pro forma underlying costs would increase to mid to high single digits for FY19, you can understand the reluctance of investors to really rally behind the stock for now.

Domain's digital and print listings have no doubt been impacted by lower new listing numbers and lower auction volumes and Sydney market listings were down 8% for the September quarter with auction volumes dropping 22%.

Domain shares are 32% below where they were at this time last year, but the upcoming holiday season is likely to give very little reprieve.

REA Group Limited (ASX: REA)

Although its share price is not looking too flash right now, multinational digital advertising business, REA Group Limited could have better chances of weathering the housing market downturn than the others mentioned in this article, so it seems.

REA shares are at $71.48 at the time of writing, which is close to its price point of around $72 at this time last year, but a far cry from 52-week highs of$93.35 reached in late August.

Nevertheless, REA has a pretty solid international exposure buoying it and this is nothing to be sneezed at when the local market is struggling.

REA's global strategy leverages off the experience it garnered at home and with a global footprint spanning three continents, REA is asserting itself as an industry leader in the sector with fast-growing audiences in Singapore, Malaysia, and Indonesia.

While I think REA Group will suffer somewhat along with other real estate related stocks for the time being, its strategic investments look strong and should ultimately hold it in good stead.

The post 3 ASX shares set to suffer from a softer housing market appeared first on The Motley Fool Australia.

Here's a short recap of the Australian market:

• S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) lower 1.05% to 5,843.10
• ALL ORDINARIES (Index: ^AXAO) (ASX: XAO) lower 1.02% to 5,944.90
• AUD/USD at US 71 cents
• Gold at US$1,223.80 an ounce
• Brent Oil at US$79.47 a barrel

The best-performing ASX 200 share today was private hospital business Healthscope Ltd (ASX: HSO), it rose 19.3% after receiving another preliminary takeover offer from a consortium led by BGH.

Shares of organic infant formula business Bellamy's Australia Ltd (ASX: BAL) rose 4.7% today, making it one of the strongest risers.

Gold miner Resolute Mining Limited (ASX: RSG) dropped 11.3% after giving investors its quarterly activities report.

Furniture retailer Nick Scali Limited (ASX: NCK) ended the day down 5.5% after saying trading conditions were becoming difficult due to a tough housing market and a lower Australian dollar.

The share price of Brambles Limited (ASX: BXB) dropped 0.2% after giving its first quarter trading update at the AGM.

Energy businesses AGL Energy Limited (ASX: AGL) and Origin Energy Ltd (ASX: ORG) fell 2.7% and 4.4% respectively, with the government announcing it will set a default tariff for house electricity which should act as a cap on prices.

Finally, real estate agent business Mcgrath Ltd (ASX: MEA) declined 4.5% with the negative housing market impacting business performance.

Here are some of today's top stories:

• Why Transurban Group (ASX:TCL) could be the best dividend share for the next 20 years
• Here's why I don't regret selling my shares in Asaleo Care Ltd (ASX:AHY)
• Why this top broker thinks Australia and New Zealand Banking Group (ASX:ANZ) will underperform in short-term
• Why I'm investing in this industry at the moment

The post ALL ORDINARIES finishes lower Tuesday: 8 shares you missed appeared first on The Motley Fool Australia.