Rupert Murdoch wants to own FTSE 100 shares, but I don’t!

Four approaches to taking over from a News Corp the subsidiary helped increase the company’s share price Right move (LSE:RMV), FTSE100 shares, almost 14% more.

REA Groupa subsidiary of the Australian media conglomerate, of which Rupert Murdoch is chairman emeritus, owns and operates real estate websites around the world. It sees the business of its UK-based counterpart as complementary to its business and is interested in acquiring the entire issued share capital.

However, after rejecting a fourth and final offer worth 780p per share, he now says he is no longer interested in buying.

Time will tell whether this is a negotiating tactic.

He will remain independent

REA Group’s initial offer was 698 pence per share. The last offer was 11.7% higher than this one. And 40.7% higher than the Rightmove share price just before the first attempt was revealed.

The takeover was rejected because the British company’s directors believe that “materially undervalued“group. Personally, I think this is a mistake.

A look at the company’s balance sheet as of June 30, 2024 shows that, apart from cash and receivables from customers, its greatest asset is goodwill, which is difficult to value. On the same day its book value was £66 million. The company’s market capitalization of £4.87 billion is now a staggering 74 times higher.

The impressive thing is that there are no debts on the books.

Since the company’s balance sheet is small, an earnings-based approach is necessary to value the company.

For the year ending December 31, 2024 (FY24), analysts forecast earnings per share (EPS) of 25.98p. At the current share price (October 1) of 626p, its forward price-to-earnings (P/E) ratio is 24.1.

While well above the FTSE 100 average, this is not an excessive amount for a high-margin online company.

For example, Autotrader For the current financial year (March 31, 2025), the company is expected to post earnings per share of 32.69p. If achieved, the forward earnings multiple is currently 26.5.

And REA Group is trading forward (2024) at a P/E ratio of 57. No wonder it was willing to pay the group up to 30 times earnings, which in my opinion is more than generous.

Looking to the future

In some respects, Rightmove’s main strength is also its main weakness.

With an 86% share in “the best real estate portals”, 2 billion website visits each year and 93% consumer awareness, there appears to be little room for further growth.

Although there are signs of recovery in the housing market, the group’s directors admit that this will not be enough to sustain the company’s medium-term ambitions of achieving double-digit percentage growth in both revenues and profits.

To achieve this, the company is trying to repeat its residential success in the commercial real estate market. He also wants to work with mortgage brokers. Use artificial intelligence to generate more revenue from the data you collect.

This all sounds very credible to me. As the chart below shows, the company has a strong history of delivering earnings growth. But I still don’t want to invest.

A dividend yield of 1.5% is not very attractive, and the takeover approach has pushed the company’s share price to a level that is now close to being expensive.

It’s not that I’m against the Right Movement, I just think there are better opportunities elsewhere.