Property portal contest a pointer to data-driven future

A potential move on British property portal Rightmove could position both it and REA Group for the challenges and benefits of the coming AI revolution.

REA Group has led the transformation of the local real estate advertising market. Picture: Getty Images

The REA Group has led the transformation of the local real estate advertising market, growing its business well beyond its origins as a property portal into a $27bn prop tech business.

With a potential play for Britain’s Rightmove now public, it is weighing up one of the largest offshore corporate plays by an Australian company in recent years.

It comes after a period in which foreign groups have been swooping on Australian listed businesses.

If it is pursued, a takeover has a potential worth of more than $10bn. REA has until month’s end to commit to the move, but it will be betting that its unique technology, customer management systems, shift into big data and capabilities in areas like financial services will give it the edge if it bids for the British company. A successful move would make REA a truly global prop-tech company that would be well positioned to capitalise on the AI revolution and the changes that are likely to sweep through real estate, data and advertising markets in coming years.

From an earnings perspective, Citi analyst Siraj Ahmed sees the potential acquisition of Rightmove as probably accretive for REA, but noted the competitive nature of the British market.

But a deal’s real advantage would be the potential for REA to add strategic value to the British company, as it seeks to expand in areas where the Australian company has the knowledge. While there are differences between the British and Australian markets, Rightmove is also a clear leader against its rivals Zoopla and OnTheMarket. The latter company was snapped up by US commercial real estate giant CoStar last year and billed as a market disrupter in the British market, though Rightmove has kept its dominant position.

On Citi’s reckoning, REA is well positioned. It trades at a significant premium to Rightmove, giving it capacity to make a takeover stack up. This is partly founded on REA’s strong local standing.

Morningstar analyst Roy Van Keulen said despite Rightmove’s home market having more than twice the population as REA’s home of Australia, the homegrown company was almost four times as valuable when measured by market capitalisation.

He considers a potential acquisition of Rightmove to be categorically different from REA’s earlier overseas endeavours where it helped companies consolidate their positions or were in emerging markets.

“Rightmove has already established itself in the UK and operates in a market with good monetisation opportunities. Using REA’s know-how we expect Rightmove to become more effective in its operations and monetisation,” he said.

While the competitive landscape in Britain presents a challenge, he pointed to REA’s experience in residential property listings and potential for cost sharing if synergies across the companies were realised.