Domain Holdings Australia Limited

ASX:DHG

Domain Holdings Australia Limited

ASX:DHG
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$2.85 (+0.7%)
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Forum Topics DHG DHG Financials

Pinned straw:
juneauquan
Added 3 months ago

Results seem okay. Share price intially rose on the results, but dropped during the day to be down about 2.6%

Based off a market cap of $1.9b and non-adjusted net profit, Domain has a PE ratio of about 38

If the company maintain FY24 sort of growth over the next 5-10 years then valuation maybe justifiable, however growth has been spotty over the past 7 years (last image)

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Dominator
Added 3 months ago

Ok rant time... PE of 38 for a company that has grown revenues 17% (total not CAGR!) over the last five years while the market it covers has been booming... I wouldn't classify this as just a Domain specific issue though more an ASX market problem. Just look at CBA which has been discussed here on Strawman over the last week, according to TIKR, higher PE then Google for almost no expected growth in EPS (compared to Google's 22% CAGR EPS growth over the next 2 years).

I am always perplexed as to why perceived "quality" Australian companies have such high multiples. I understand PE is simple metric but I like to pair it with longer term expected EPS growth rates. IE what are you paying for an expected growth in EPS?

In doing so if you compared the "quality" Australian companies to global leaders like Google, Microsoft, Apple and Amazon, most of the time the Australian company is more expensive for the same growth rate expectation or about the same PE for a much lower growth rate. Why buy expensive ASX companies when there are similar or higher quality (IMO I guess) global leaders as your alternative?

Is this ASX valuation anomaly due to investors limiting their investment horizon to the ASX only? That's the only reason I can think of to explain the difference.

Disc: Hold Google and NDQ IRL.

15
NewbieHK
Added 3 months ago

That a bit of success by anssociation (ie REA) annd Australian super needs to go somewhere.

For me it’s not surprising the PE ratios of our banks, supermarkets and numerous other top 20-50-100 are arguably very over priced when compared to international peers. I can only think this valuation will continue to increase as the super for investment grows. In saying that those higher valuations are underpinned by big $$$ that don’t move often or easily.

I find this one of the biggest challenge when looking at valuations in Australias top 20,50,100. Trying to put logic behind valuations when they are underpinned by billions in super funds that aren’t going anywhere needs to be accounted for therefore makes it difficult to value without considering this component.

PS: On a quick glance 90% of Domain is held by 5 major entities who probably aren’t going anywhere because this is a blue chip - isn’t it ;)

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Dominator
Added 3 months ago

@NewbieHK good point, super is a huge support mechanism for Australian equities and will continue to be over the longer term. Looking at some of the major super funds for growth/high growth portfolios their allocation to Australian shares is about 30% on average. Future fund currently only has a 10% allocation to Australian shares for comparison returning similar numbers to super growth portfolios.

7
UlladullaDave
Added 3 months ago

PS: On a quick glance 90% of Domain is held by 5 major entities who probably aren’t going anywhere because this is a blue chip - isn’t it ;)

And one of them, NEC, owns 60% and has some well known issues of being a business facing end of life structural headwinds in its core TV business. Maybe, because NEC is one of those businesses "owned by no one in particular" that litter the ASX, the people whose jobs rest on NEC staying alive see DHG as a cash cow. It's weird to see a company with a higher payout ratio than the $28b gorilla (REA) that is 15x larger while talking up investing for growth and all that jazz. You can't help but think sending money back to shareholders as dividends is not because of lack of investment opportunities available to DHG.


10
mikebrisy
Added 3 months ago

@juneauquan "If the company maintain FY24 sort of growth over the next 5-10 years then valuation maybe justifiable, however growth has been spotty over the past 7 years"

From my perspective, reading this comment is enough reason to move on. The only other knowledge I have is that $REA is the clear #1 competitor.

Disc: Not held

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