Is SEEK Limited still a great long-term investment?

When it comes to employment in Australia there is one company in particular which dominates the job market. That company is of course the outstanding SEEK Limited (ASX: SEK).

In the last 10 years SEEK has grown enormously under the leadership of its chief executive and co-founder Andrew Bassat. It now commands 33% of the market, which is approximately 8x its nearest competitor according to management.

Developing such a commanding share of the market has of course benefitted SEEK financially. Back in 2006 it was a small cap share pulling in revenue of just over $100 million and net profit of $34 million. Fast forward to today and it’s part of the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) and pushing on $1 billion revenue with $195 million profit expected by management in the current fiscal year.

Long-term shareholders have been rewarded handsomely thanks to its shares producing a total shareholder return of 14.1% per year during this period. The question now is how long can this continue?

Fortunately due to its international aspirations I believe it can continue for some time. A big part of the reason why the company is on track to reach $1 billion revenue this year is the stunning growth of its international segment.

Half-year revenue in this segment grew 34% from $222 million to $298 million, completely eclipsing the $152 million domestic revenue during the half. Much of this growth comes from its fledgling China-based subsidiary Zhaopin.

In my opinion the majority-owned Nasdaq-listed Zhaopin is the main attraction to SEEK right now. It is the number one online jobs site in China and contributed $166 million to SEEK’s half year revenue.

But its success has caught the eye of private equity firm Sequoia China Investment Management. It made a takeover offer for Zhaopin in May, following a similar offer from a Chinese consortium in January.

The most recent offer values SEEK’s stake in Zhaopin at $830 million, and I am pleased to see it has so far failed to gain any traction with the board. I believe this offer is far lower in comparison to the upside that SEEK would lose out on in the future. As far as I am concerned its Chinese subsidiary is some distance from its full potential at present.

I feel certain SEEK will be a great long-term investment if it continues to hold onto its stake in Zhaopin. It will still have a very strong business without it, but it would lack the spark that a lot of investors may look for. If it sold the stake I wouldn’t be surprised to see some investors jump out of SEEK and into its growing industry peer Freelancer Ltd (ASX: FLN).

SEEK Limited is undoubtedly a great share that features in many readers' portfolios. If you'd like to team it up with another quality blue chip share then look no further than these three fantastic shares. I believe each has the potential to take your portfolio higher in the coming months, as well as provide a solid dividend.

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Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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