REA Group (REA) $172.03

REA +3.43%: It’s always useful to get a read on the property market from Australia’s largest listings platform, particularly when sentiment around housing has become so negative. REA Group’s FY26 result suggests conditions are softer, but far from falling apart, with national listings holding up better than feared and the business continuing to grow earnings through pricing, product mix and cost control.

REA delivered a solid FY26 result in the context of the market, and relative to expectations, with core earnings ahead of consensus, margins expanding and a better-than-feared finish to the year.

FY26 Highlights:

• Core NPAT of A$682.1 million, up 14% and around 7% ahead of the A$634.5 million expected.
• Revenue of A$1.79 billion, up 12% and broadly in line with the A$1.80 billion expected.
• Core EBITDA of A$1.07 billion, up 13% and in line with consensus.
• Core EBITDA margin of 61%, up from 58% and ahead of the 58.6% expected.
• Adjusted EPS of A$4.94, modestly ahead of the A$4.89 expected.
• Final dividend of A$1.73 per share, up 25% from A$1.38.

Australian residential revenue increased 12%, supported by strong yield growth and flat national listings across the year. The June quarter was particularly encouraging, with listings up 11%, helping REA finish FY26 more strongly than expected.

The outlook is mixed rather than outright weak. July listings were down just 2% nationally, although the geographic split was stark. Sydney and Melbourne fell a combined 16%, while Brisbane, Adelaide and Perth rose 13%. Management expects national listings to be flat to down by low single digits in FY27. There are also some tentative signs that the market may be starting to stabilise. Mortgage Choice loan applications have improved in recent weeks, narrowing the gap with the prior year and occasionally moving ahead of comparable daily levels. That contrasts with the more negative industry data elsewhere, but it suggests the market is adapting rather than freezing.

Importantly, a softer property market is not necessarily bad for REA. In a strong market, properties can sell quickly or even off-market. In a slower market, agents and vendors are more likely to pay for greater reach, visibility and premium placement. REA has recently pushed through an 8% price increase on premium products, while customer satisfaction (apparently) remains strong.

Cost control was another positive. Management continues to target margin expansion, with underlying operating costs expected to rise by mid-single digits in FY27, or mid-to-high single digits including M&A.

MM’s view: This was a better result that we had expected from REA, with the earnings beat, margin expansion and strong fourth quarter demonstrating the resilience of the platform. The housing market may remain soft for a while longer, particularly in Sydney and Melbourne, but REA’s dominant position and pricing power mean it can continue growing even in a subdued listings environment. After a significant share-price pullback over the past year, the valuation is less far demanding than it once was.