Shares in online jobs portal SEEK Limited (ASX: SEK) traded flat today on news that the company wants to raise up to €1 billion (A$1.4 billion) on the Singapore stock exchange via the issue of debt in the form of interest bearing notes.
The fact that Melbourne-based SEEK is choosing to raise this substantial sum of capital in Singapore is disappointing for the ASX Ltd (ASX: ASX) operated Australian Stock Exchange and shows how Singapore’s reputation for strong regulation and corporate governance goes a long way to attracting huge amounts of capital from wider Asia.
Unfortunately, some of the Australian stock exchange’s leading companies in the form of Bellamy’s Australia Ltd (ASX: BAL), Sirtex Medical Limited (ASX: SRX) and Aconex Ltd (ASX: ACX) have given a dreadful impression to institutional investors recently, after chief executives sold shares at prices inflated by their own incorrect forecasts. Subsequent to the admissions that these forecasts were wrong the share prices fell between 40% – 60% in an embarrassing six-month period for Australia’s market regulators.
As far as I could see SEEK did not disclose specifically why it’s raising the capital although the global jobs portal has gone public about its desire to take its fast-growing Chinese jobs marketplace Zhaopin private. Recently it flagged that two private equity groups may buy the publicly traded shares in Zhaopin in a move to take it private with SEEK retaining its controlling interest.
SEEK also has a substantial debt pile it’s probably looking to manage, with the company reporting that as at December 31 2016 it had drawn down $893.8 million of its total debt facilities, versus cash on hand of $636.4 million for a net debt position of $234.1 million.
SEEK Australia carries the lion’s share of the debt drawdowns at $676.5 million, with SEEK’s international operations actually having a net cash position of $419.1 million.
The notes will be issued on a fixed and floating rate basis with reference to margins above the London and European inter-bank lending rates of LIBOR and EURIBOR.
The fact that SEEK can raise such funds to restructure its debt and invest for growth demonstrates what a powerful global business it is, with plenty of opportunity to keep growing strongly. However, it faces plenty of competition from the likes of global players Indeed and LinkedIn Corp.
Despite the competitive threats, I think SEEK shares look a buy at $15.05, as this is a powerful business with multiple revenue growth levers, scalability, and attractive economics. Importantly, it also has a founder led management team with heavy share ownership, a long-term focus and track record of delivering on short-term guidance.