REA Group (REA) delivered the first fruits of its strategy shift from subscriptions to value-based listings in FY14, with a 36% uplift in operating earnings to...

REA Group (REA) delivered the first fruits of its strategy shift from subscriptions to value-based listings in FY14, with a 36% uplift in operating earnings to $149.9 million, slightly below expectations. The Australian residential advertising business continues to exploit its increasingly dominant share of consumer activity. Italy and Hong Kong remain troubled, with quick remedial action required. While the market made a bilious response to the result (8.6% decline on a result 1.6% below consensus), we retain a positive view of REA Group, as it goes through a 4-5 years process of repricing its advertising products and creates new value-added services. While risks should not be underestimated, the current emotion-driven sell-off provides an opportunity to buy this stock at well below fair value. We retain our Add recommendation with an updated share price target of A$53.51 (previously A$53.03). More details on the Morgans blog: (VIEW LINK)