REA FH26--Top 10 Holding--Platform under threat?

February 08, 2026

REA FH26 RESULT

Some moderate exits and acquisitions muddied the reported numbers, but revenues on an underlying basis were +8% and NPAT +10%. The reported numbers were slightly lower with the business mix changes. The revenues were negatively impacted by listing weakness in the Brisbane and Perth markets, down 12% and 20% respectively. Overall listings are expected to be 1-3% down for the year. Yield growth was strong, 12-14% guide, and is expected to continue into 2027. The yield growth is a mix of price increases and product mix, with the higher yield products gaining share. Geographical mix could impact yield, if Brisbane and Perth improve, with the smaller cities having lower yield. The half saw -6% new listings, which was a disappointment and led to a weak result.

With the weaker revenue growth, jaws closed, raising concerns that costs will increase more than revenues going forward. REA commented that they continue to target opening jaws going forward despite some more spending in AI, which they see falling within the long term capex guidance of 7-9% of sales.

Engagement on the platform remains very good, and the underlying property market remains sound. REA saw record site visits and engagement. There was some concern about a resurgent DHG under Costar ownership. My view is that they will struggle in this market, and CSTR has enough issues of its own in its home market and now has a track record of troubled acquisitions.

There has also been some concern about AI undermining the platform. REA stated that ChatGPT volumes are less than 1% and have been falling. They do anticipate using the OpenAI app when ready. In a broader sense, AI and other product developments appear to be progressing at a fast pace at REA. As well as M&A into product and data analytics capabilities, e.g., Planitor, a Canadian company owning Iguide, in which REA bought a 61% stake. The main product is a camera and software platform using AI to identify property features. Other acquisitions have been Neighbourlytics, Arealytics and Jiffy. These appear to be analytics and data to be used with AI overlays. Other products have also been launched or are in trial, a serious buyer metric, conversational AI and natural language AI.

The Audience maximiser (AMAX-automatic social media campaign) and PRO subscriptions with agents both appear to be gaining traction. Another product is Ignite, the self-serve platform, where tools and insights can be found in one place. The range of product launches is impressive and includes a serious attempt to embed AI into the platform. REA describe AI as a strategic focus and a significant opportunity. A product from Move US, Flyaround, is being assessed. REA will likely see how products progress and back the successful efforts. REA is certainly being proactive, which is exactly what you want the incumbents to do.

Mortgage Choice had a good half, revenues up 12% and appears to be winning share, Commercial was 9% higher, and New Homes 11% higher. AI is being introduced into MC to improve loan sales.

India is proving a challenge. Management has been changed, and the business was slimmed down to Housing.com. The aim is to be the most downloaded app; it is the current leader, but not dominant. Volumes were up, but completely offset by price competition. India waxes and wanes, but it is proving a real battle. The lesson here is that there is a huge difference between a dominant platform and one that isn’t.

A $200m buyback was announced, although not large, it is a sign of intent.

SUMMARY AND VALUATION

REA issues look to be market-related at this stage. India remains problematic, but the core Australian operations remain robust with no sign of platform haemorrhaging from AI or competition concerns. REA is being very aggressive on product development, but the cost has not undermined the economics at this stage. Embedding its lead with AI is obviously critical.

My base case is 15% compound over the next 5 years with a terminal exit PE of 38X, highlighting its place as one of the strongest franchises on the ASX. At $168, that generates 11% return, a return not usually seen for REA (due to competitive and AI fears). Risks remain, and any large M&A would probably be a negative; no market appears to have the positive structure like the home market.