Almost anybody who has looked for a job in Australia in the past five years is likely to have come across online employment classifieds company SEEK Limited (ASX: SEK).
While in the past job seekers would flock to the hardcopy newspapers published by Fairfax Media Limited (ASX: FXJ) and News Corp (ASX: NWS), nowadays they flock to online web portals. More often than not, that portal belongs to SEEK with it now boasting of attracting around 30-million visits per month and a 25% share of job placements in Australia.
There are many attributes to like about SEEK; here are three which stood out at a recent company presentation conducted for investors –
1) International expansion – While SEEK already has a significant share of the domestic industry, its global operations in many ways are just scratching the surface. Although the firm's international operations already attract 3-million job ads per month and 320-million monthly visits to its various sites, the global opportunities are still enormous.
2) Growth set to continue – Since SEEK's initial public offering of shares in April 2005 the total shareholder returns (share price gains plus dividends) has been a whopping 777%. It's an outstanding return and while it might be unrealistic to expect similar returns in the future, they also can't be ruled out given the global expansion opportunities that still lie ahead. Indeed, currently the domestic operations provide the lion's share of profits, but before long profit generated from global operations will likely overtake the more mature domestic business.
3) Dividend growth – Part of the beauty of SEEK's business model is the high operating margins and significant cash the business produces. At the recent interim results the board raised the dividend by 40% to 14 cents per share. Given the high multiple the stock trades on, the dividend yield is small. It has a payout ratio of roughly 50% and with earnings growth set to continue, shareholders should expect a significant boost to the dividend in coming years.
SEEK, Carsales.com Limited (ASX: CRZ) and REA Group Limited (ASX: REA) have all grown significantly in recent years and while there is still plenty of growth opportunities available to these firms, investors do need to consider whether their high valuations are justified.
