REA Group Earnings: On Track for a Bumper Year and Showing Green Shoots in India

We raise our fair value estimate for wide-moat REA Group by 4% to AUD 117 per share, from AUD 112.50 per share, following its third-quarter trading update. Australia is performing in line with our expectations as REA Group continues to track for a bumper year. However, India's results were stronger than we expected, contributing to our upgrade. At current prices, REA Group shares continue to screen as materially overvalued. We accept that the company has exceptionally strong pricing power in Australia, in keeping with its wide moat rating. However, we believe listing prices are strongly linked to property prices over the long run and don’t expect property prices to grow by double digits every year, as the market seems to imply.