** Morningstar says the market appears to be disregarding chances of a regulatory hit to profits at Australia's REA Group REA.AX

** Investment research firm flags continued price increases by the property listings portal likely to court further regulatory scrutiny and raise chances of action being taken

** Adds shares screen as "wildly" overvalued, as the market seems to expect price hikes to continue for longer time than reasonable

** Morningstar disagrees with REA that company is "entitled" to higher prices, citing expectations for property costs to increase due to lower interest rates

** Given that the company is under active investigation by the Australian competition regulator, analysts believe it is courting regulatory risk with pricing policy and commentary

** Morningstar lifts fair value estimate for REA by 3% to A$134, reflecting forecast of mid-to-high single digit price hikes over a 10-year period

** REA, on Wednesday, reported FY EBITDA from property and online advertising operations of more than A$1 bln ($650.60 bln) for the first time

** YTD, stock up 9.08%

($1 = 1.5375 Australian dollars)

(Reporting by Shruti Agarwal in Bengaluru)

((Shruti.Agarwal@thomsonreuters.com))