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SEEK (ASX:SEK) shares surge 9% today. Here’s why.

The SEEK Limited (ASX: SEK) share price has been on the move today. At the time of writing, the SEEK share price is up 8.1% to $20.78, and reached an intra-day high of $21.74. This compares with the S&P/ASX 200 Index (ASX: XJO) which has risen 0.9% to 5,946 points.

While the company has released no new news to the market, let’s take a look at what could be driving these gains.

Zhaopin investment

Overnight, international markets revealed that major e-commerce provider Alibaba Group Holding Ltd (NYSE: BABA) could invest in SEEK’s Chinese business, Zhaopin. The reported investment is said to be worth hundreds of millions of dollars in the online job ads company.

Should the speculation materialise, SEEK’s partnership with Alibaba would be a major push for greater presence in the Chinese market. Alibaba’s large customer base and reach closely associated with Zhaopin, would strengthen the online job ads brand positioning and revenue streams.

In its FY20 results, Zhaopin reported an average of 4.9 million unique visitors per day. This was a 29% on the previous corresponding year. Net income for the financial year ending 30 June came to $42.2 million. This was underpinned by performance to revenue from business process outsourcing as well as cost efficiencies taken during COVID-19.

China’s urban unemployment levels have been steadily decreasing from a record high of 6.2% reached in February. Since the re-opening of the economy, latest figures reveal that the urban unemployment rate dropped to 5.7% in June and July.

The country is expecting a record 8.74 million graduates to enter the job market this summer which in turn will benefit Zhaopin. In addition, the Chinese government also pledged to support job growth with a raft of initiatives to be announced.

Recent Zhaopin news

Late last month, news broke out that several shareholders were weighing up their options in regards to their holdings. Zhaopin’s investors FountainVest Partners Co. and Hillhouse Capital Management were reportedly looking to reduce their stake through a $500 million private placement.

As the firm’s gauge potential investor interest, it was noted that the owners intend to retain a collective 51% stake in the Chinese online recruitment business. The additional holding is anticipated to be sold off in stages.

The SEEK share price sharp recovery

The SEEK share price has strongly recovered from the onset of COVID-19 which halted the global economy. The SEEK share price hit a 52-week low of $11.23 and has gained 87% in the last 6 months.

At a market capitalisation of $7.37 billion, I think that SEEK share price is good value as it closes in on its 52-week high of $24.09. The world’s economic climate is starting to show sunnier days ahead and I believe SEEK will become a much leaner business post COVID-19.

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Motley Fool contributor Aaron Teboneras 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.

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