D/G to sell, too much priced in for a listings recovery that hasn’t materialised DHG is now trading c11% above our price target, and we lower our rating to Sell (from Neutral)…FY20 revenues look set to disappoint vs. market, but there may be a cost offset DHG is executing well on depth / yield per listing initiatives – but we think these will be offset by the listing volume declines described above, and DHG normalising to 52 weeks in FY20 (vs. 53 weeks in FY19). Future price changes due 1-Jan-20 also remain uncertain but we note REA has slowed FY20 price increases, with a commitment to slow price increases (for Premiere All) further in FY21. We cut FY20 residential revenue growth to +5% (vs. previously +12%). However we also cut FY20 opex ex-transactions growth to -1% (from +4%), given DHG has shown a willingness to slow costs in line with revenues. As such EBITDA (-4%) and NPAT revisions (-5%) are less severe.
That is really, really weak. Domain was smashed yesterday:
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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.
