Seek and you shall find


Nowhere has the internet had more impact than the employment market (unless of course you think of the sex industry – and many people do!). The jobs market is a microcosm of how the ‘net has killed classified ads. Fairfax’s (ASX: FXJ) classifieds were once its ‘Rivers of Gold’, but they have now all but dried up.

One of the beneficiaries (and causes) of this demise has been Seek (ASX: SEK) with its stranglehold on the jobs market. Today we saw the potential for any business like them with fixed cost base and high leverage to economic activity. Seek shot the lights out this morning, announcing revenue growth of nearly30%, net profit increasing by 35% and a 20% increase in the company’s dividend.

The company turned in great results from all of its businesses, including education which has not been too special in recent years. Importantly for its future, Seek registered 14 million visits to its site in July alone – five times more than their biggest competitor.

Such a dominant market share  bodes well for this business, delivering what appears to be an unassailable lead in the jobs ad market. It also appears that rolling out its jobs platform in Asia is starting to pay dividends with Zhaopin, the leading Chinese jobs web site, posting strong EBITDA growth of 70%.

So what next for this Goliath of the Australian web space?

It seems reasonable to suggest that the company is well insulated from economic woes as people are inclined to job hunt whatever the economic climate; in fact, when times are hard people need to educate themselves more for the fewer job opportunities that are available. Luckily Seek has positioned itself for this eventuality too, with itseducation business being a handy add on which also helps in employment downturns. Its other tactic for growth is  so-called “opportunity matching” which it is promoting as the way forward.

Seek’s biggest threat would appear to be from other social media sites like Facebook (Nasdaq: FB) and LinkedIn (Nasdaq: LNKD). Whilst these companies are on Seek’s horizon, they appear to be small distractions rather than the main game which for Seek is international expansion. It has exposure to over 2 billion potential job seekers in Asia and Brazil. These are huge markets and as the world moves on from the London Olympics to Rio in 2016, the focus will be on those business that can do well out of a better economic environment in Rio. Seek would appear to be in the gold medal-winning position coming down the back straight.

With its dominant platform and Asian strategy plus the education business, Seek feels like it’s trading on an undemanding price at the moment despite the 5% rise today after its results were announced figures. With a P/E of 16, it certainly has room to expand towards the 20 level of some of its peers like Carsales (ASX: CRZ), if it can continue its growthIf you still believe in Father Christmas you can stick with the Fairfaxes of the world, but if, like me, you see even more potential in the web then Seek will be a beneficiary, there is no doubt.

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Motley Fool contributor Henry Jennings, of Cameron Stockbrokers, currently has no position in any of the equities mentioned; however, Cameron Stockbrokers’ clients may have such positions. The Fool’s disclosure policy includes certain trading restrictions that apply to [Stockbroker]. However, his clients are not subject to our disclosure policy, and thus are free to trade any such equities.   The Motley Fool has a disclosure policy.

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