Economic and business drivers
SEEK began its operations in Australia in 1997 and has a presence in 18 countries to date. There has been a noticeable increase in intangibles which shows the increasing investments in new markets worldwide via the development of brands, licences, websites and goodwill.
The 2019 annual report outlines areas of growth in:
· International portfolio of employment and education businesses
· Insights into the future of work
· Presence in 18 countries including China, South East Asia and Latin America
· Ongoing investment into AI and technology
SEEK Limited is making some headway internationally which at times has proven difficult given the economic climate in some countries. It could be seen as a quite risky investment however in recent times the Zhaopin investment (China) paid off. Hong Kong and Singapore markets showed solid revenue growth for their SEEK Asia divisions. Their objective for growth seems to start off with minority stakes in leading online job placements sites in other emerging markets such as Brazil, Thailand and Malaysia, and invest heavily in development in those projects.
They are also actively investing in some Early Stage Ventures that are not quite at the point of scaling up to become viable, however they believe the turnaround point is not far away such as their investment in the online education space, Coursera.
SEEK has also shown over the last few years that they are financing through debt instead of equity. Equity has not changed in the last four years; however the level of debt has doubled. I find that this level of debt could be seen as one of the highest risk factors to investors.
SEEK’s business is highly sensitive to fluctuations in the jobs market. This can be seen in temporary dips in the share price due to times such as the Global Financial Crisis, the Hong Kong protests, trade wars, and more recently COVID-19. However its share price tends to trend well and recover quickly once the worldwide economy improves as job creation is at the centre of economic recovery.
As a predominantly online business SEEK will experience less ‘bricks and mortar’ type issues and overheads, however investment in Artificial Intelligence is a relatively new area of investment and provides some uncertainty.
Due to the scale of SEEK’s business and the amount of time in the industry, it is unlikely that any major competitors would be able to overthrow or have a negative impact on the future growth. Consideration should also be given to the impact that the exchange rate between many countries SEEK has branched into may have on its financial reports.
Overall, I would suggest SEEK has earned its place internationally, and in Australia, as a company to watch. I would suggest there are not many people in Australia that would not know who SEEK are, or what they do. Initially I expected they would be an Australian only company providing job vacancy information. I was surprised to learn of their international presence and that there were other arms to the business including business sales and education. There seems to be much room for growth and success for SEEK Limited looking into the future.
