SEEK

Wednesday 24th August 2011

Online Employment advertiser SEEK (ASX: SEK) has been downgraded to Hold from Buy by Goldman Sachs after SEK’s full year result released yesterday.

GS believes slowing employment growth and weaker economic conditions will slow labour market churn, and in turn, slow job ad velocity, which will have an impact on SEEK's job ad volumes. "In addition, we do not expect the levers which protected SEEK in previous downturns (unwind of yield discounts) to be as prominent this time." GS believes the company's current valuation (SEK currently trading at $5.42) is fair at FY12/FY13 P/E of 14.5X/10.9X, and that there's strong valuation support at A$5.00 or below. GS has revised lowered its target price to A$6.70 from A$7.70.

In its full year result announced yesterday, SEEK announced revenue of $343.1m, Normalised EBITDA of $143.6m and Normalised net profit after tax (NPAT) of $104.6m for the 12 months to 30 June 2011. Compared to the prior year, this represents revenue growth of 22%, Normalised EBITDA growth of 22% and Normalised NPAT growth of 26%. The strong result was achieved due to continued growth in the domestic Employment business, strong growth in Zhaopin and solid performance in SEEK Learning. This was a record full year reported result for SEEK and reflected SEEK’s employment business across Australia and New Zealand which achieved a strong revenue and EBITDA result.

In its outlook statement, SEEK expects the continuation of a gradual and steady recovery in employment markets and it says it is well positioned versus its online peers and particularly against print, as growth in online job ads has significantly outpaced growth in print job ads.

SEEK owns 56.1% of Zhaopin (a leading employment website in China), 30% of Brasil Online Holdings (the two leading employment websites in Brazil), 22.0% of JobStreet (a leading employment website across SE Asia) and 40% of OCC (the leading employment website in Mexico). SEEK Asia, a majority owned subsidiary of SEEK, owns 80% of JobsDB (leading job network across SE Asia).

Contact IRG on 0800 437 8489
**A disclosure statement is available, on request and free of charge by calling 0800 437 8489.

Recommendation sourced from the IRESS software trading platform

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