SEEK is the owner of Australia’s largest job portal and also has investments in international-based job websites too.
The company believes that there’s a $60 billion market opportunity across SEEK’s footprints, which includes the $500 million Australia & New Zealand employment marketplace opportunity, the $10 billion international employment marketplaces & education opportunity, the $20 billion talent sourcing & placement opportunity and the $30 billion human capital management opportunity.
SEEK management believe that the company is uniquely positioned to attack these opportunities because it is the market leader in Australia, and in countries in Latin American and Asia. The Chinese site, Zhaopin, in-particular is an important asset and could be the biggest contributor of earnings in the future.
The company is constantly investing for the long-term, which is why revenue is predicted to grow by 20% to 25% in FY18. Management also confirmed that earnings before interest, tax, depreciation and amortisation (EBITDA) is expected to grow by 14% to 15% this year. Reported net profit after tax (NPAT) is expected to be around $200 million after deducting for investments in early stage.
I think SEEK is a very good business and one that is showing most other ASX companies how to effectively grow overseas. It has delivered good investment returns for shareholders and the long-term investments it’s making into the business will hopefully translate into profit growth.
However, employment can be a cyclical sector so I imagine next time there is a downturn there will be less job positions on offer and therefore lower revenue for SEEK. Personally, I am waiting for that scenario which should present a compelling long-term buy price for SEEK.
SEEK is currently trading at 34x FY18’s estimated earnings with a grossed-up dividend yield of 3.2%. I don’t think SEEK is a buy at today’s price, but I do think it would be a good contributor to a diversified portfolio over the coming years.
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has recommended SEEK Limited. 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 Scott Phillips.