Domain Is Well-Positioned for the Economic Recovery

Domain offers exposure to favourable trends in the Australian real estate market, but with relatively low exposure to real estate price risk in the long term. The company has generated strong revenue growth in recent years, boosted by an increase in agents using its website, listings, premium listings, and acquisitions. However, we don't expect similar growth from these factors in future, as we believe Domain now has near saturation of available agents and listings, and we don't forecast further acquisitions. We expect Domain to generate revenue growth primarily from growth within its residential division, and we expect listings to increase by at least 1%-2% per year, in line with population and dwelling growth over the long term. In addition, we believe Domain can generate above-inflation growth in revenue per listing, as a result of above-inflation listing price growth and an increase in the proportion of premium listings on its website, from around 10% national penetration toward REA Group's 20%. We forecast a revenue CAGR for the group of 7% over the next decade.