Shares in Seek Ltd (ASX: SEK) were pummelled earlier this week after the company reported a $307 million loss dragged down by one-off factors.
The question now is: Are the shares good value? The analyst team at UBS seems to think so, rating the shares a buy, and they also forecast increasingly strong dividend yields from the online jobs platform.
Let's have a closer look at why the stock got smashed earlier this week.
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Underlying business performing well
On the face of it, the results were not too bad. Seek's sales revenue was up 17% to $1.28 billion, while EBITDA was up 15% to $530 million.
The statutory loss of $307 million was dragged down however by a $201 million negative revaluation of the Seek Growth Fund, which makes venture capital investments, and other one off items totalling $377 million.
The latter was mostly made up of a previously announced $356 million impairment charge recorded against Seek's investment in Chinese jobs portal, Zhaopin.
On the dividend front, the company declared a final dividend of 25 cents, bringing the total for the full year to a record 52 cents.
Seek Managing Director Ian Narev said re the result:
SEEK again delivered against our financial and operating commitments. We recorded our sixth consecutive year of double digit yield growth, ensuring that revenue growth again outpaced cost growth to deliver a fourth consecutive half of operating leverage, despite a slightly weaker volume environment. Placement share was stable, reinforcing our leadership position across our APAC markets. Strong and consistent operational performance again led to standout financial results. EBITDA was up 15% and adjusted profit up 28%. The resulting 21% increase in free cash flow, combined with our conviction in the future, gave our Board the confidence to determine a record full year dividend. The fact that these results were achieved despite lower paid ad volumes shows the significant benefits of our investment in Platform Unification and AI capability, making SEEK's marketplace even more valuable.
Seek said the Growth Fund would be likely to sell down some assets with a value of more than $1 billion soon, with further details likely to be given before the end of 2026.
Seek gave guidance of revenue of $1.21 to $1.28 billion, and adjusted profit of $185 to $215 million.
Seek shares looking like a good buy
UBS said in its note to clients that Seek's net profit was a miss to expectations, but earnings guidance was roughly in line.
They said that management had flagged the possibility of further capital returns once the Growth Fund sales had taken place.
UBS has a price target of $19.70 on Seek shares compared to $13.67 at the time of writing.
It is also expecting the dividend yield to increase each year, from 4.2% in FY27 up to 8.6% in FY31.
