Deutsche Bank has lifted its recommendation on Fairfax Media to a BUY, mainly on the strength of the Domain real estate listings.
Fairfax’s annual results came in slightly behind forecasts, with net profit of $144 million and EBITDA (earnings before interest, taxes, depreciation and amortisation) of $289 million.
However, the Domain earnings of $86 million were ahead of Deutsche Bank’s estimates of $82 million.
“We view this growth particularly positively, given Domain is the highest growth division of FXJ and warrants the highest multiple,” Deutsche Bank says in a note to clients.
This chart demonstrates the steep climb in new listings at Domain:
Deutsche Bank has updated its price target for Fairfax to $1 a share and upgraded its rating to BUY from HOLD.
Fairfax, which is undergoing a transformation to a digital media company, is currently trading at $0.895.
Domain has started the 2016 financial year strongly with revenue up 53% for the first five weeks compared to the previous year.
This chart shows the strong digital component of Domain and the forecast earnings growth:
(Disclosure: Allure Media, the publisher of Business Insider, is 100% owned by Fairfax Media)