Online job advertising and education company, SEEK Limited (ASX:SEK) has seen its share price double over the past 12 months. I have outlined four reasons below why the recent share price surge may just be the beginning.
1) Seek dominates the Australian job search market. Job seekers spend an incredible 90% of time online on Seek.com.au when searching for a job. This network effect gives Seek a strong competitive advantage. The structural change of print revenue migrating online is still taking place, with 67% of advertising revenue online, some of the remaining 33% will transfer over the next five years. This represents further opportunity for Seek to grow though volume and price increases.
2) Seek's international investments offer huge growth potential. Analysts have forecast that over the next four years, Seek's international earnings will represents more than half of Seek's total earnings. Seek has purchased interests in dominant online job sites in large, developing markets such as China, Brazil, Mexico and Indonesia. It is highly feasible that the Chinese job site, Zhaopin could exceed the size of the entire Australian business. Furthermore, Seek has planned to float Zhaopin in ether the U.S. or Hong Kong later this year. Analysts estimate the float will be valued at $882 million.
3) The Seek education division continues to perform well and leverages strongly off the audience of online jobs seekers. The division has successfully grown earnings at a compound annual rate of 58% since 2007.
4) Although Linkedin does represent a threat to Seek, the largest share of the Australian online job market comprises low-skilled labour jobs which are advertised almost exclusively on Seek. With Linkedin aimed at the professional market, it is not expected to take significant market share away from Seek.
