Ann: Appendix 4E and Full Year Financial Report FY23, page-21

Obviously it pays not to fall in love with a stock at any time, but this one is definitely my favourite. I consider it possibly Australia's best business and hope to hold for 20 plus years.
My question to people smarter than me (nearly everyone) is this. Would REA ever be considered a takeover target? Would a company with this kind of moat not be looked at by foreign companies, or cashed up private equity from the US?

A beautiful business, no doubt, but a valuation closing in on 50x P/E the market has certainly fallen in love with the stock. Not sure how one makes money from that starting point.

Accordingly, I am reducing what is now an oversized position for me, which is not justified by the lack of valuation appeal.

As for a private equity (PE) entity buying REA, I very much doubt that would happen, for a number of reasons:

1.) PE tends to want to buy deeply discounted and unloved companies. REA is clearly neither of those.

2.) PE looks for idle capital or assets that are able to be stripped from acquired companies, thereby reducing the effective acquisition price. REA is an asset-light business (basically has no hard assets) and sure, REA's balance sheet is lazy, PE could strip out cash by gearing the balance sheet. But the maximum extent to which this can occur is around $2.0bn, above which debt metrics would start to become a bit stretched (eg., Net Debt to EBITDA would rise to 3x), and $2.0bn is a very small number compared to what PE would need to pay in order to acquire REA (certainly in excess of $25bn)

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