Shore Capital sticks with 'buy' for Rightmove amid REA takeover speculation
Shore Capital has reiterated a 'buy' rating on after Australia's REA Group confirmed it was considering an offer for the UK property platform, highlighting the opportunities for shareholders whether or not a takeover happens.
REA, majority owned by News Corp, said in a statement on Monday that it sees "clear similarities" between the two groups, but has not yet approached, nor had any discussions with, Rightmove regarding any potential offer.
The Melbourne-based firm said that a combination of the two companies would provide a "significant opportunity" to unlock shareholder value.
"We await further developments around this unexpected announcement but, on a first pass basis, retain an open mind regarding the potential benefit for Rightmove (which remains UK focused) shareholders of becoming part of a bigger international group which appears to have strong momentum and has delivered a strong share price performance over the last 12 months," said Shore Capital analyst Roddy Davidson.
Nevertheless, Davidson said that Rightmove is still expected to generate "attractive" profit and dividend growth over the coming years. Shore Capital predicts a compound annual growth rate of 7% in adjusted earnings per share between 2023 and 2026 and an 8.9% CAGR in dividend per share, along with "very strong" cash generation.
"That said we have regularly highlighted that we believe the group's is now in a more challenging phase with regard to the ease with which it can develop new revenue opportunities and achieve price inflation," Davidson said.
With the stock having traded sideways over the past 12 months, the share price was sitting at a 22% discount to Shore Capital's fair-value estimate of 652p as of Friday's close.
However, the shares were up 22.3% at 679.4p by 1140 BST.
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