Stake in PropTiger fits with REA’s global expansion strategy

By Trevor Hoey. Published at Jan 11, 2017, in Equities

Multinational digital advertising business, REA Group (ASX: REA) has announced its intention to acquire a 14.7% strategic stake in PropTiger, a leading digital real estate marketing platform in India.

Notably, NewsCorp is currently the largest holder of PropTiger and will hold a 21% stake after completion of REA’s investment. REA’s Chief Executive, Tracey Fellows highlighted the fact that this investment will leverage REA’s real estate and digital expertise together with NewsCorp’s content, distribution and marketing strengths to ensure success, continuing to build value for shareholders.

PropTiger owns and operates proptiger.com, Makaan.com and it has just announced the acquisition of Housing.com. Establishing this combined network of digital property portals has promoted the group to a top three position in the Indian market across key consumer engagement metrics, including time on site and visits.

Importantly, PropTiger is the only player in India offering the full range of online and off-line property services, such as personalised search, virtual viewing, site visits, home loans and legal and financial diligence.

In highlighting the significance of this market Fellows commented, “India is one of the fastest-growing property markets in the world and the country is seeing a rapid transition from traditional to digital real estate advertising”.

This initiative is consistent with management’s strategic focus outlined at its AGM in November where Fellows said, “The third pillar of our strategy is about being global and having already extended our reach to 4 continents and 11 countries we will leverage our scale, our knowledge and our capability to increase our speed to market and our competitiveness”.

The response to the PropTiger initiative was noticeably positive in trading patterns yesterday. After the company’s shares had slumped from $57.40 to $56.80, they recovered nearly all of this lost ground in the last hour of trading following the announcement at 3:15 PM.

Consequently, when analysts assess this development the response could be positive, perhaps resulting in REA share price pushing up towards its consensus price target of $60.25.

Analysts at Citi recently ran the ruler across a number of Australia’s ASX listed online media and publishing companies, and REA was one of the standout stocks with its buy recommendation supported by a 12 month price target of $59.95.

In discussing the group’s outlook, Citi said, “Despite subdued property market turnover, we forecast a three-year earnings per share compound annual growth rate of 18% with scope for significant upgrades (potential eps upside of more than 15%) from a normalisation of activity levels in the property market”.

It should be noted that broker projections and price targets are only estimates and may not be met. Also, historical data in terms of earnings performance and/or share trading patterns should not be used as the basis for an investment as they may or may not be replicated. Those considering this stock should seek independent financial advice.

S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of Maven Capital Pty Ltd (AFSL No. 418504). The information contained in this article is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.

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S3 Consortium Pty Ltd does and seeks to do business with companies featured in its articles. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this article. Investors should consider this article as only a single factor in making any investment decision. The publishers of this article also wish to disclose that they may hold this stock in their portfolios and that any decision to purchase this stock should be done so after the purchaser has made their own inquires as to the validity of any information in this article.

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