A more modest growth story is likely from REA Group in the second half yet brokers expect the company to maintain its dominance and still produce strong listings volumes.
- Several factors may dampen earnings growth in the third quarter
- Yet considerable upside is envisaged for Australian depth products
- Financial services & agent comparison may drive a step change in earnings in the medium term
REA Group (REA) has provided a consistent and robust first half and, while management suggests more moderate growth is more probable in the second half, brokers suspect there is potential to surprise on the upside.
Seasonally, revenues are expected to be lower anyway but there are reduced project start-ups which will affect developer revenue. The company has also pointed to an early start to Easter, which will impact earnings growth in the third quarter.
Guidance for the remainder of FY18 appears relatively subdued but remains consistent with Deutsche Bank’s forecast for a slowdown in volumes. The broker suspects the company is trying to hose down expectations after a strong first half.
Industry data signals listing volumes were down in January but this is generally a slow time of year so Deutsche Bank does not place much weight on the numbers.
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