Domain Holdings Australia Limited

This report is an updated version of the report published on the 14 October 2022 at 3:52 PM (GMT+11) AEST

Section 1: Company Overview and Fundamentals

1.1 Company Overview:

Domain Holdings Australia Limited (ASX: DHG) is an advertising & marketing company that focuses on providing a portfolio of property brands in Australia. The company offers a marketplace to search & list properties and provide data-driven agent & consumer solutions for a group of customers to assist in their property-related decisions.  

1.2 The Key Positives, Negatives, Investment Highlights, and Risks

1.3 Top 10 Shareholders: The top 10 shareholders together form ~70.26% of the total shareholding. Fairfax Media Ltd and Fairfax SPV No.1 Pty. Ltd. hold a maximum stake in the company at ~45.30% and ~14.76%, respectively.

1.4 Key Metrics: The company has reported a high EBITDA margin of around 34.2% in FY22 compared to the industry median of 32.4%. Further, the asset turnover ratio improved in FY22, which was around 0.25x compared to 0.23x in FY21. Below is captured the trend of the debt-to-equity ratio and gross margin:

Section 2: Business Updates, Financial and Operational Highlights

2.1 Recent Updates:

2.2 Insights of FY22: During FY22, the company reported a surge in revenue from AUD 289.6mn in FY21 to AUD 356.7mn in FY22, driven by growth across all Core Digital segments. Further, the net profit attributable to members of the company grew by 46.0% in FY22 on a YoY basis.

2.3 Revenue Drivers: The company aims to evolve its marketplace strategy by diversifying its future revenue mix and accelerate growth in Agent solutions. During FY22, the company acquired Insight Data Solutions (IDS), to scale Property Data Solutions, and also acquired RealTimeAgent and Realbase to scale its Agent Solutions business. 

Section 3: Key Risks and Outlook:

Section 4: Stock Recommendation Summary

4.1 Price Performance and Technical Summary:

4.2 Fundamental Valuation

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is October 14, 2022. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Disclaimer

Kalkine New Zealand Limited is a Financial Advice Provider (“FAP”) and is authorised by a Transitional FAP license issued by Financial Markets Authority (“FMA”) to provide financial advice. Kalkine provides only general financial advice through its research reports following a person becoming a member. The reports contain buy/sell/hold and other recommendations in relation to equity financial products. The recommendations and opinions [on this website] / [in this report] do not take into account any of your investment objectives, financial situation or needs. Before you make a decision about whether to acquire a financial product, you should obtain the Product Disclosure Statement from the product issuer. You should consider the appropriateness of advice taking into account your own objectives, financial situation and needs and seek independent financial advice before making any financial decisions. If you act on the advice in the research reports, you may have to pay fees, expenses or other amounts (but not to Kalkine).  Further information about the complaints and dispute resolution process, as well as information about Kalkine’s duties are available on Kalkine’s website.  Please read our Financial Advice Provider (FAP) disclosure statement and Complaints Handling Guide, which are available on the website.