The strong performance in Australia was due to 23% YoY increase in residential business, with 15% YoY increase in yields and 7% YoY growth in new listings. The robust performance in India was driven by growth in adjacency services on the Housing Edge platform and continued momentum at Housing.com, which benefitted from strong events, yield growth and improved monetisation in Tier 2 cities. REA group’s EBITDA increased 23% YoY, reaching A$236mn in 1QFY25, while FCF grew 16% YoY to reach A$74mn.

Founded in 1995, REA is a digital advertising company majority-owned by News Corp and headquartered in Melbourne, Australia. REA operates Australia’s largest residential real estate portal, realestate.com.au, alongside platforms in Asia and North America. Its primary revenue streams include advertising, subscription services, and property-related solutions, including the sale of physical and e-books, digital real estate listing and lead generations products, as well as services to agents, brokers, and developers. Additionally, the company offers mortgage broking through Mortgage Choice and property data analytics via PropTrack. Listed on the Australian Securities Exchange, REA is a market leader in the digital property advertising sector with a market capitalization of A$31.9bn, serving a diverse client base of real estate agents, developers, and financial institutions.

Strong financial results and dividend payout

In its FY24 (ended June 2024), REA reported a 23% YoY increase in revenue to A$1.45bn, driven by good performance across the segments. Residential property segment grew 24% YoY to A$996mn due to contribution from both Residential Buy market and Residential Rent market. The growth in residential buy market was primarily due to 19% YoY growth in buy yields which was driven by 13% rise in average price, increase in depth penetration and 3% positive geographical mix. Additionally, listings grew 7%, with Melbourne up 22% and Sydney up 21%. Furthermore, residential rent market performance was driven by increase in depth penetration and 8% YoY rise in prices.

Commercial & Developer segment increased 12% YoY to A$159mn, driven by higher yields, increased depth penetration and 11% YoY price rise in commercial market, while developer market benefited from Increased project duration and prior year price rise. Additionally, Media, Data & Other segment increased 25% YoY to A$122mn, driven by data revenues which saw double-digit growth due to higher PropTrack valuation and growth in Data & Insights revenue. Furthermore, Financial services delivered 21% YoY revenue growth to A$74mn. Group EBITDA jumped 27% YoY to A$825mn, with margins of 57%, up 200bps YoY. Driven by strong performance the company declared a final dividend of A$1.02 per share, bringing the total annual dividend to A$1.89 per share, up 20% YoY, with dividend yield of around 1.7% and a robust 80% payout.

Digital transformation a key driver for growth

Over the past decade, REA established itself as a leader in the digital property advertising space by leveraging advanced technologies and data-driven strategies. Its realestate.com.au platform, witnessed increased user engagement with the rollout of augmented reality (AR) tools for property visualization. This innovation not only improved the customer experience but also strengthened REA's position as the go-to platform for property seekers and advertisers.

REA also expanded through strategic acquisitions and partnerships, including investments in data analytics via PropTrack and mortgage broking through Mortgage Choice. These initiatives diversified its revenue streams and reinforced its competitive edge. PropTrack achieved robust double-digit YoY revenue growth in FY24, with 77% YoY increase in high-rated leads. Additionally, by leveraging generative AI to scan listings, PropTrack extracted 90mn additional attributes, enhancing personalization, insights, and AVM performance. Mortgage Choice Freedom, powered by Athena, achieved $1.2b in settlements, while submissions volumes increased 4% YoY in 2HFY24, with signs of improving market conditions.

Valuation overview and analyst sentiment

REA’s stock price is up around 34% in the last 12 months. Despite the significant rise, the stock is trading below its historical averages and global peers. The stock is currently trading at a P/E of 56.5x based on FY25 estimated earnings of A$4.3 per share, compared to its 10-year average of 63.9x and global peer’s average of 67.2x. In Addition, it is trading at an EV/EBITDA of 33.1x based on FY25 estimated EBITDA of A$950mn, compared to its 10-year average of 27.1x and global peer’s average of 42.7x.

Out of the 15 analysts covering the stock, five have given a “Buy” recommendation, while three have “Outperform” rating. The consensus average target price is at A$229, indicating that the target has already been met owing to the recent run-up in prices, reflecting no upside potential in the near-term. However, any correction in prices driven by the broad-based market correction might provide an opportunity for evaluating the company for investment. Additionally, analysts expect the revenue to clock around 12.5% CAGR over the next three years, while operating profits are projected to grow at approximately 17%, with margins expanding by 400bps to reach 53% in FY27.

Overall, REA Limited is the largest digital property advertising company in Australia, supported by its dominant market position and strategic initiatives. A significant portion of its revenue is driven by its realestate.com.au platform, alongside diversification through data analytics (PropTrack) and mortgage broking (Mortgage Choice). The company’s ongoing focus on technological innovation, including AI-driven personalization, ensures sustained user engagement and growth opportunities. Furthermore, its financial strength and dividend policy provide comfort to investors. However, risks such as slower-than-expected growth in property listings, increased competition, or macroeconomic challenges like rising interest rates may lead to underperformance relative to expectations.