Firm tone overall
SEEK (SEK) provided a post-results briefing and Q&A session at our Melbourne offices recently. Guidance was reaffirmed, despite some softening in overall job ad growth this year. While there was softening in some categories of job advertisements (notably trades and services jobs in NSW and real estate, most other categories remain firm. China and South East Asia continue to show strong top line growth.
Our overall impression was that, if current trends are maintained through FY19, SEEK is travelling close to the upper end of its guidance range.
No change to forecasts
Our FY19 forecasts are in line with company guidance and we see no reason to change them at this stage. Barring a full-scale global trade war (which would hit Zhaopin), we venture that on the trends to date SEEK will come close to the higher end of its target.
Our share price target remains unchanged (Morgans clients can login to view).
Risks and catalysts
Near-term risks to SEEK's earnings outlook include:
- a softening of the Australian labour market;
- slow take-up of the Premium Talent Search (PTS) product by major recruiters;
- unfavourable moves in exchange rates; and
- sharp downturns in the Chinese, South East Asian or Latin American economies.
Potential near-term re-rating catalysts include:
- further strong growth in Australian labour demand;
- accelerating adoption of PTS;
- stabilisation of exchange rates; and
- firmer tone in the Chinese, South East Asian and Latin American job markets.
SEEK offers investors exposure to the global hiring cycle and the increasing migration of employment advertising to the online market. To date the company has shown an ability to respond to competitive threats. As the stock trades in line with our share price target we maintain our Hold recommendation.
We would consider SEEK good value for long term buyers around A$19 per share.
Morgans clients can login to view our detailed report and increased share price target for SEEK (SEK). Alternatively, please contact your nearest Morgans office for access.
Disclaimer(s): Analyst owns shares.
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