How come everyone thinks shrinkflation is about to end?

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From Deutsche:

REA has delivered a solid 1Q17 result (particularly in light of the underlying listings environment), with Revenue growth of +16% (DBe +15%) and EBITDA growth of 9% (DBe +7%). Guidance for the remainder of 1H17 was somewhat subdued, with management indicating that (1) they don’t expect an improvement in the listings environment and (2) opex growth will continue at a similar rate in 2Q, leading to minor downgrades to our forecasts. We retain our Price Target of $49.50/share but with the stock trading close to our valuation and the absence of any near term negative catalysts, we upgrade our rating from SELL to HOLD.

Despite the continued weakness in listings, our analysis of volumes since 2011 shows that for the Sydney market in particular, listings are at the lowest levels observed during that period. Whilst no clear catalyst for a turnaround is evident, we wouldn’t expect the current level of decline to continue into CY17. On this basis, we view 1H17 as effectively the trough in the current listings cycle and expect to see an improvement into 2H17 (if not in the absolute volumes, at least in the growth rate).

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About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.