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Dividend Portfolio: Trade Me Group (ASX: TME)

Published 27-APR-2017 00:00 A.M.


2 minute read

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Overview: Trade Me Group Limited ("Trade Me", "the Company") is a New Zealand-based software company focused on classified advertising. Trade Me owns and operates, New Zealand's largest online auction and shopping website and fifth most frequently visited website in the country. The site averages over 25m visitors per month and spans from auctions to fixed-priced sales for new and used goods, with automotive, real estate, and employment businesses.

Catalysts: Trade Me is the market leader in online classified advertising and has a strong track record of earnings and dividend growth. Over the past four financial years, revenue grew at a compound annual growth rate of 10%, and continuation of this trend whilst controlling expenses is the primary catalyst for shareholders. Payable in September 2017, Trade Me is expected to increase its full-year dividend, taking the annual yield to over 3.5%.

Hurdles: In order to retain its market-leading position, Trade Me has to invest significantly in product enhancements and marketing and the Company may be subject to increasing competition from NZ and overseas. As the Company is currently focused on New Zealand only, Trade Me may be operating in a saturated market, which may no longer generate sufficient new demand for its products and services.

Investment View: Trade Me offers profitable exposure to online retail trends in New Zealand. We are attracted to the Company’s growth trajectory, market position, and history of dividend growth. Competition and market-specific risks are primary hurdles and may challenge the Company’s ability to deliver ongoing dividend growth on favourable terms for shareholders. Overall we favour the balance of risk and believe that Trade Me offers a compelling mix of capital growth and income. We initiate coverage with a ‘buy’ recommendation and add this position to our dividend portfolio.


General Information Only

S3 Consortium Pty Ltd (S3, ‘we’, ‘us’, ‘our’) (CAR No. 433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information and is for informational purposes only. Any advice is general advice only. Any advice contained in this article does not constitute personal advice and S3 has not taken into consideration your personal objectives, financial situation or needs. Please seek your own independent professional advice before making any financial investment decision. Those persons acting upon information contained in this article do so entirely at their own risk.

Conflicts of Interest Notice

S3 and its associated entities may hold investments in companies featured in its articles, including through being paid in the securities of the companies we provide commentary on. We disclose the securities held in relation to a particular company that we provide commentary on. Refer to our Disclosure Policy for information on our self-imposed trading blackouts, hold conditions and de-risking (sell conditions) which seek to mitigate against any potential conflicts of interest.

Publication Notice and Disclaimer

The information contained in this article is current as at the publication date. At the time of publishing, the information contained in this article is based on sources which are available in the public domain that we consider to be reliable, and our own analysis of those sources. The views of the author may not reflect the views of the AFSL holder. Any decision by you to purchase securities in the companies featured in this article should be done so after you have sought your own independent professional advice regarding this information and made your own inquiries as to the validity of any information in this article.

Any forward-looking statements contained in this article are not guarantees or predictions of future performance, and involve known and unknown risks, uncertainties and other factors, many of which are beyond our control, and which may cause actual results or performance of companies featured to differ materially from those expressed in the statements contained in this article. S3 cannot and does not give any assurance that the results or performance expressed or implied by any forward-looking statements contained in this article will actually occur and readers are cautioned not to put undue reliance on forward-looking statements.

This article may include references to our past investing performance. Past performance is not a reliable indicator of our future investing performance.