Market alert: REA share price jumps after robust FY22 earnings report

REA Group (ASX: REA) announced its FY22 earnings on Tuesday with revenue, EBITDA and net profit increasing from FY21.

The leading real estate platform has achieved year-on-year (YoY) revenue growth of 26%, equaling $1,170 million. The REA reported the EBITDA moved up 19% to $674 million while the net profit was up 25% to $408 million, with the full-year dividend coming in at 164 cents per share, up 25%.

“FY22 has been an exceptional year for REA. The record take up of our premium listings products enabled us to fully capitalise on the buoyant listings environment, and it demonstrates the value we provide to our customers and vendors,” said REA Group CEO Owen Wilson.

Key highlights

The core revenue of Australia’s operation was up 23% YoY to $1,116 million, or 18% excluding the impact of the Mortgage Choice acquisition. Residential revenue was the key driver, increasing by 24% thanks to soaring national listings and an eight percent average national price rise. However, developer revenues were down due to a 21% decline in project launches while the REA Group’s flagship site, realestate.com.au, continued to lead the market with record audience numbers. During the past financial year, an average of 12.7 million people (62% of Australia’s adult population) visited the site, three times more than the nearest competitor. Active members (the drive behind the value), have increased by 25%.

REA India, which joined the REA family this year has delivered an impressive performance with revenue growth of 92% to $54 million on a pro forma basis, assuming it was owned for the full prior period. Revenue growth was largely driven by its sub-website Housing.com’s property advertising income.

Challenges and Outlook

Rising costs: Driven by the acquisitions of Mortgage Choice and REA India, core operating expenses for the company have increased by 34%. Even excluding acquisitions, the operating costs nevertheless jumped 11%, reflecting investment costs, higher labour costs, and marketing expenses.

Residential listings: The impact of the RBA’s May and June interest rise has emerged in the listing number, showing the slowest growth in the past four quarters as seen in Sydney and Melbourne as listing for house purchases decreased by more than five percent during the fourth quarter.

Outlook: Moving ahead, the REA group expects moderate growth in revenue and earnings as the Australian residential property market is notably slowing down. While this adjustment has been baked during the fourth quarter, strong fundamentals included record low unemployment and high household savings - all of which should continue to keep the national wide property market afloat.

Share price and technical analysis

The share price for the REA group jumped five percent after the announcement and apart from the group’s strong performance, shareholders were also pleased to find out that the company has increased its dividend by 25% to a total of 164 cents per share during the 2022 financial year.

According to the daily chart, the price has consolidated its position above the 20-day moving average and stayed in the ascending tunnel. The next target will be an eye on the four-month-high at $131 while any slip should meet the support at $121.