Seek Limited

SEK Details

Seek Limited (ASX: SEK) offers online employment marketplace services to candidates and recruiters, education services to working professionals and students as well as invests in early-stage ventures (ESVs) involved in human resource management.

Result Performance for the Year Ended 30 June 2021 (FY21)

• The company’s revenue stood at A$1,591.1 million in FY21, an increase of 1% YoY. EBITDA stood at A$473.6 million in FY21, an increase of 15% YoY. Reported NPAT for the period stood at A$752.2 million in FY21 compared to a net loss of A$113.1 million in FY20.
• Under continuing operation, in FY21, the revenue was up by 17% YoY, and EBITDA was up by 30% YoY. There was volume and yield growth in the SEEK ANZ division because of SME-led recovery and greater product utilization.
• SEEK Asia witnessed variable volume improved as markets gradually recovered, with continued recovery seen in key markets of Hong Kong, Singapore, and Malaysia.

Income Statement (Source: Company Reports) 

Outlook:

FY22 Guidance (excluding significant items) for SEEK (excluding the SEEK Growth Fund): EBITDA will be in the range of A$425-A$450 million. NPAT will be in the ambit of A$190-A$200 million. FY22 Guidance (excluding significant items) for the SEEK Growth Fund: SEEK’s equity accounted share of the NPAT losses will be in the range of A$20-A$25 million. 

Key Risks: 

The company faces the risk of an ongoing pandemic across its markets. As a result, SEK will reduce employment, hiring activity and job ad volumes. It is also susceptible to the risk of synergy from the acquisitions and investments made in new ESVs. 

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Stock Recommendation: 

The company has delivered 9-month and 1-year returns of ~+14.36% and ~+36.27%, respectively. The stock is trading above than the average of the 52-week high price of $34.150 and the 52-week low price of $19.648.

The stock has been valued using EV/Sales multiple-based illustrative relative valuation and has arrived at a target price that reflects a decline of higher single-digit (in % terms). A slight discount has been applied to EV/Sales Multiple (NTM) (Peer Average) considering higher debt to equity ratio in FY21 as compared to the industry median as well as risks associated with the business.

Considering the factors above, its current trading levels, and the associated business risks, we advise investors to book profits. Accordingly, we give a “Sell” rating on the stock at the closing market price of $31.66 per share, down 1.063% as of 11^th October 2021. 

Technical Overview:

Source: REFINITIV; Note: Purple Color Line Reflects RSI (14-Period) 

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

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