2 Interesting Blue-Chips - REA, ALL

  • May 31, 2019 AEST
  • Team Kalkine
2 Interesting Blue-Chips - REA, ALL

Understand the Blue-chip category!

The Blue-chip category is a high-quality and usually high-priced stock category, having the confidence of investors in the company’s record of delivering stable earnings and strong fundamentals. With a low to moderate amount of debt, a blue-chip company is well-established and financially strong. They are large-cap companies which have sustained the business for years, delivering dominant products and services.

REA Group Limited:

Specialising in property, REA Group Limited (ASX: REA) is a multinational digital advertising business operating Australia’s leading residential, commercial and share property websites. In Asia, REA Group owns leading portals in Malaysia, Hong Kong and Indonesia, and prominent portals in Singapore and China, and a leading property review site in Thailand. The company also holds shareholding in property websites of the USA and India.

On 10th May 2019, the company announced its results for the nine months ending 31st March 2019, reporting revenue growth of 13% to $667.8 million and EBITDA growth of 15% to $404.7 million. REA achieved this growth amid challenging market conditions.

Financial Information (Source: Company’s website)

The Chief Executive Officer of the REA Group, Owen Wilson, mentioned that the company expects less uncertainty surrounding the property market backed by the Banking Royal Commission and the Federal election as it enters the new financial year.

Taking into consideration the unusual market circumstances, the company anticipates Q4 to have a lower rate of revenue growth than Q3.

The company’s stock closed higher at A$88.980 on 31st May 2019, up by 0.542% relative to its last close.

Aristocrat Leisure Limited:

Aristocrat Leisure Limited (ASX: ALL) is a leading provider and publisher of games that offers a range of products and services like electronic gaming machines, digital social games and casino management systems. With over 6,100 employees in offices across the world, ALL’s land-based products are approved to be used in over 300 licensed jurisdictions.

On 23rd May 2019, the company released its financial results for the half year ended 31st March 2019. The company reported NPATA of $422.3 million which was up by 16.8% in reported terms and 7.7% in constant currency, in comparison to $361.5 million NPATA in the six months to 31st March 2018. This was an outcome of the company’s growth in the Americas and Digital businesses and an improvement in its performance across the ANZ region.

Financial Results (Source: Company’s report)

The normalised revenue was over $2.1 billion during the period, with a rise of 20.8% in constant currency and 29.8% in reported terms, compared to the prior corresponding period. The EBITDA was up by 10.2% in constant currency and 19.2% in reported terms.

ALL has been continuously investing in technology, talent and content in both land-based and Digital operations. It is expanding its North American addressable market and widening its opportunities in the Digital games market (approximately worth over $50 billion). The business profile of the company has changed over the last several years with a major chunk of profit generating from the US.

ALL aims at expansion over the 2019 fiscal year in North American adjacencies and across its total Gaming Operations. The Design and Development investment’s upliftment is also anticipated by ALL along with a further 100 - 150bps reduction in effective tax rate. It expects moderate growth in corporate costs as it grows a more complex and diverse business.

The company’s stock closed at A$29.120 (As on 31st May 2019), up by 1.64% from its last close.


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