Domain Shares Plummet 12.81% with Poor Trading Update

Domain Holdings Australia Limited [ASX:DHG] shares are trading 12.81% down from yesterday’s market price. They’re now trading on the ASX at $2.70 apiece.

This is likely to have come as a result of the weird property bubble that’s just burst around Aussie property, as well as underwhelming quarterly figures from the company.

Furthermore, though Domain is now a separate entity, Fairfax Media Limited [ASX:FXJ] still retains 51% ownership of the property company.

In anticipation of the commencement of the Fairfax/Nine merger — creating an even larger Aussie media giant — Domain, Fairfax and Nine released brief trading updates on the ASX this morning.

And they didn’t look promising.

Too many downs to stay positive

Domain’s trading update revealed that while digital revenue is 6% higher, their total revenue is 1% lower. This doesn’t seem too big a drop, but any decrease in revenue is a troubling sign for a company.

What’s more, Pro forma total costs are around 7% higher. So they’re earning less, and spending more.

The company believes ‘revenues have been impacted by lower new listings and auction volumes, particularly in Sydney and Melbourne’.

The report goes on to state that in the last financial quarter, Sydney new listings were down 8% and auction volumes down 22%. Melbourne results were 1% and 18% in these respective fields.

Fairfax Media also released their trading update today as a means to touch base before the merger scheme begins. They experienced their own 12% decrease in share price today.

Unfortunately, the update showed overall group revenues 5% below last year’s figure. The update provided no indication of possible causes for this decline. The only note of encouragement was a concluding statement that ‘we continue to implement cost savings measures’.

Nine Entertainment Co. Holdings Ltd [ASX:NEC] were about 10% ahead for the September quarter, but this didn’t stop them from experiencing a 14.04% decrease in share price.

This merger is certainly causing strife amongst these three companies at the moment.

What this means for Domain

Citi analyst David Kaynes is shocked by the poor performance of Domain, even though Fairfax is showing struggles as well. He says:

We are surprised by the magnitude of the [Domain] revenue deterioration, and had expected that prices increases (10-15 per cent) should have allowed it to maintain double digit digital revenue growth despite the volume headwinds.

If current revenue trends persist through the rest of [2018-19], this would suggest likely double-digit earnings per share cuts compared to our current estimates.

But while some experts aren’t confident in the bounce back from these falling revenues, the upcoming merger scheme is bound to cause some sort of movement in these figures.

As to whether the moves are positive or negative, well, keep checking this space to find out the result.

Regards,

Ryan Clarkson-Ledward,
For Market & Money


Ryan Clarkson-Ledward is a junior analyst for Markets & Money. Ryan has degrees in both communication and international business. His priority is bringing you the latest price updates on stocks through ASX updates, as well as supporting Sam Volkering with background research. As part of the team at Markets & Money his aim is to provide unbiased and relevant news for readers. Ryan’s work with Sam is designed to provide research that complements Sam’s analysis for small-cap and technology stocks. Together, their objective is to break through all the jargon and give you the hard facts to inform your investment decision-making. Ryan writes for:


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