This report is an updated version of the report published on the 16 July 2024 at 1:16 PM AEST

Domain Holdings Australia Limited (ASX: DHG) 

DHG is an online property marketplace offering comprehensive solutions, services, and data to the Australian residential and commercial property markets. Leveraging its extensive property and consumer data, the company specialises in technology and AI product development to deliver innovative products through its platform and sub-brands.

Recommendation Rationale – SELL at AUD 3.34

• Trading Around Resistance: DHG’s share price is hovering near the R2 level recommended on 17 May 2024; and thus, it offered a profit booking opportunity.
• Overvalued Multiples: On a forward 12-month basis, the stock is trading at a Price/Earnings multiple of 34x vs industry (Technology) average of 17.2x.
• Debt Position: As at 31 December 2023, the company’s net debt stood at AUD 175.8mn demonstrating a leverage ratio of 1.46x ongoing EBITDA. DHG seems to face challenges due to its debt load in relation to its available cash reserves, potentially affecting its liquidity and ability to fulfil debt obligations.
• Emerging Risks: DHG operates in a highly competitive market. Intense competition can lead to pricing pressure, thereby impacting its profit margins. As a property technology company, DHG relies heavily on its digital platforms. Data breaches could disrupt services, harm its reputation, and lead to significant financial and legal consequences.

DHG Daily Chart

(Source: Trading View)

Valuation Methodology: Price/Earnings Approach (FY June'25E) (Illustrative)

Stock might trade at a slight premium to its peers, considering expectation of EBITDA margin expansion and higher listings in FY24, etc. For valuation, few peers like REA Group Ltd (ASX: REA), CAR Group Ltd (ASX: CAR), Seek Ltd (ASX: SEK), and others have been considered. Considering that the stock is trading near to its R2 level, share price movement, other risks associated with the business, and downside indicated by the valuation, it is prudent to book profit at the current levels. Hence, a ‘Sell’ recommendation is given on the stock at the current price of AUD 3.34, at 10:05 AM AEST as of July 16, 2024.

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

Note 1: Past performance is neither an indicator nor a guarantee of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is 16 July 2024. 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 downtrend may take a pause backed by demand or buying interest.

Resistance: A level at which the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: In general, it is a level to protect further losses in case of any unfavourable movement in the stock prices.