No place like home
In line with similar businesses overseas, the offering from Domain (ASX:DHG) is shifting towards a marketplace model, where an ecosystem of services exists where Domain can support agents and consumers at more points on their journey of buying or selling properties.
With technology becoming more interactive with itself, the linking of different customer requirement is becoming more the norm than the exception. Consumers looking to purchase a property can now be supported through the whole process of mortgage application to settlement to finding a tenant and managing the rental application process inside one login.
The Daily view of DHG highlights the strong support level at $2.95 currently being retested. Current price movement remain below the 20 day and 200 day moving averages.
Recapping on the FY-22 results, revenues increased 23% over FY-21 to $356m, with net profit increasing 46% $55.3m.
Source: Domain (ASX:DHG)
Looking at the individual segments Core listings, achieved a 9% increase with the company signing a record number of new and upsell contracts the real increase came from the 70% increase in new contracts within the Q4-22 period we view this as providing a particularly encouraging start to forward guidance for FY23. A solid 14% improvement in the yield from revenue has been recorded, this we believe is based upon the current inflationary price cycle underway.
Within the Agent solutions segment, the company recently acquired Realbase for $180m, this has scaled the business to cover over 50% of all Australian property transactions and offers scope to further address new markets. With the delivery of revenue growth circa 67% at the Real Time Agent, and Price finder App delivered 13% subscriber growth, this is currently the best net increase in seven years.
In Consumer Solutions, the new management team has delivered revenue growth of 69%. The increasing efficiency of the domain home loan business is reflected in the 35% increase in conversion to approval achieved over the past two years. In Property Data Solutions, the Insight Data Solutions acquisition significantly expands the size of the addressable markets, with the company seeing momentum in new client wins in the financial institution and government sectors.
During the year Domain undertook significant investment in data to build a Single View of Property, to create a high quality property data asset, offering real time property data analytical tools.
Source: Domain (ASX:DHG)
The forward outlook for Domain holding looks positive with the Q1-23 for sale listings returning to the normal seasonal patterns current onboarding of contract signups has continued from the strong Q4-22 momentum. The one area of decline will be the print segment although producing a 22% improvement in revenue over the FY-22 period to $21.7m, the forward expectation is the print offering will go fully digital.
Source: Domain (ASX:DHG)
The Australian property market has remained resilient on all fronts with increasing interest rates. Current clearance rates have jumped to a nine-month high in regional Australia, with Auction volumes across CBD areas also increasing 4.8% Â Within the Domain platform the offering of rental listings we consider will remain a high turnover revenue stream for the company with rental yields on property increasing 0.5% YoY and looking to continue higher over the next 1H-23.
Source: Macro Business
Australia’s 2022 property market may be defined as the year that transitioned into a downturn from a once-in-a-generation property boom of 2021. With serviceability of house costs becoming a major factor in 2023, we hold the view that with the Australian Government induced increase in migration underway to alleviate skills and services shortages, the underlying demand for property will remain stable as prices go through the interest rate cycle. Current research suggests that while property price may soften it is unlikely they will erase the underlying growth achieved over the past 24 months.
The monthly view of DHG shows price moving within a small range and below the 12-month moving average. Current price movements remain with the long-term consolidation area of $2.40 support and $4.30 resistance.
Summary
Domain group (ASX:DHG) has achieved YoY growth and used the increases in revenue to make strategic purchases to drive the technology offering to facilitate agency and private customer business. Potentially future interest rate rises will be limited as the economy cools, property strategists are increasingly holding the view interest rates may fall into 2024 offering the property market some certainty about loan serviceability, this will remain a positive for the Domain group (ASX:DHG).
We retain our Hold recommendation for members with exposure.
