REA on a tear as value hits $10bn
REA Group’s market value has hit $10 billion for the first time after News Corp’s digital real estate business delivered a strong lift in first-quarter earnings.
Shares in REA have now jumped 56 per cent over the past 12 months, and 316 per cent in five years on the back of a marketleading position in online classified advertising.
The stock closed up 1.72 per cent at $76.17 after REA reported a 24 per cent increase in earnings to $107 million for the three months to September 30, 2017.
The operator of realestate.com.au said total revenue climbed 21 per cent higher to $190m, driven by strong residential growth and the inclusion of financial services revenue from August 1.
Tracey Fellows, chief executive of REA, told The Weekend Australian the strong result was underpinned by a “tailwind from positive listings” in the key markets of Melbourne and Sydney, “price increases” and the “success of the Premiere All product”, where customers commit to using the firm’s top-tier product for all of their listings.
Hamish McLennan, chairman of REA, hailed the results as “an incredible milestone”, and made reference to the company’s journey from a struggling Melbourne start-up to a tech-driven multinational. “We should not lose sight of Lachlan’s (Murdoch, co-chairman, News Corp) prescient investment, made all those years ago,” Mr McLennan said.
When REA Group was facing collapse a year after floating in 2000, Mr Murdoch invested in the firm and leveraged the publisher’s newspapers to help it grow and prosper.
Mr McLennan added: “I’m really happy with the way it’s going. It’s the best management team we’ve ever had. Tracey is an outstanding leader and the management team is first class.
“We will continue to innovate as an Australian technology leader and support our agent partners. Robert Thomson (CEO, News Corp) has been a great supporter of our global ambitions.”
The result comes as Fairfax Media prepares to partially spin off its prized real estate asset, Domain, which is REA’s main competitor for residential listings in Australia.
Ms Fellows said: “I’m pleased that they are going to have the same kind of transparency that we have.”
Operating expenses at REA increased 17 per cent to $81m for the first quarter, up from $69m in the year-ago quarter.
The company reaffirmed its full-year revenue guidance for its financial services business to between $26m and $30m.