Communication Services

Domain boosts marketplace offering via $180m Realbase acquisition

By Market Index
Fri 01 Apr 22, 4:01pm (AEDT)

Key Points

  • Domain to buy Sydney-based campaign management technology platform, Realbase
  • Domain’s $180m non-renounceable entitlement offer is priced at $3.80 a share
  • Consensus on Domain is Moderate Buy

Domain Holdings (ASX: DHG) entered into a trading halt this morning following the real estate listing aggregator's announced plans to raise money to fund the 100% acquisition of real estate campaign management platform Realbase.

To the uninitiated, Realbase is a Sydney-based campaign management technology platform used by Real estate agents to price, order and track the campaign marketing products they need to list and market a property for both on-market and off-market sales.

With two key brands, Realhub and Campaigntrack, Realbase is understood to have a 40% market share of total property transactions in Australia and NZ.

Entitlement offer

Underwritten by major shareholder Nine Entertainment (ASX: NEC), Domain’s $180m non-renounceable entitlement offer - priced at $3.80 a share, and a 5.2% discount to the last close - will fund the group’s upfront consideration.

However, based on Realside’s performance, Domain would have to pay another $50m in earnouts to the 2026 financial year. A maximum $50m in earnouts depends on Realbase delivering a fivefold increase in earnings by FY 2026 compared to FY 2022.

Nine's decision to take up 100% of its entitlement, represents around 59% of the total equity raising. On completion, Nine's holding in Domain will increase from 59.03% to 62.03%.

EPS accretive

Commenting on the acquisition of Realbase, management expects the transaction to be highly strategic with annual pre-tax synergies of up to $18m in earnings (EBITDA) by the 2026 financial year.

As well as complementing Domain’s property journey-related Marketplace offerings, Realbase is also expected to boost Domain’s Agent Solutions strategy and increase market coverage from 35% to 50% of all Australian property transactions.

Management expects Realside to deliver $9m in earnings from around $22m revenue in FY22, with the offer and the acquisition being earnings per share (EPS) accretive on pro forma basis for FY22.


At the half year Domain delivered:

  • Revenue of $175.3m, up 27.9%.

  • Trading expenses of $114.3m, up 36.7%.

  • Ongoing expenses of $106.7m, up 15.7%.

  • Trading earnings (EBITDA) of $61.0m, up 14.2%.

  • Ongoing earnings of $68.5m, up 53%.

  • Trading earnings (EBIT) of $44.6m, up 28.5%.


Domain Holdings share price has underperformed over six months.


What brokers think

Based on the brokers covering Domain (as reported on by FN Arena), the stock is currently trading with 28.7% upside to the target price.

After interim earnings (EBITDA) came in 7.5% ahead of expectations, UBS maintains its Buy rating for Domain. The broker was impressed by the first half 19% jump in controllable yield, and a strong listing environment, evident from the first six weeks of the second half FY22. The broker’s target price is lowered to $5.50 from $5.60. (23/02/22).

Based on the continued expectation of strong growth, Citi retains a Buy rating but has trimmed the target price by -5% to $6.15.

Despite a weaker housing market, Citi expects strong listings growth to be evident during the Q3 trading update. (21/02/22).

Macquarie retains a Neutral rating (target price $4.50) and expects second half listings to be cycling off strong 45% growth in the previous comparable period. (18/02/22).

While Credit Suisse’s earnings per share (EPS) estimates rise 23%, due to lower interest and depreciation and amortisation, the broker’s target price falls to $4.85 from $5.70 to reflect the delays to stamp duty reforms and an increased weighted average cost of capital. The broker retains a Neutral rating. (18/02/22).

Consensus on Domain is Moderate Buy.

Based on Morningstar’s fair value of $4.60, the stock appears to be undervalued.


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Market Index

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