Comprehensive Investment Analysis of Seek Limited's Performance

This report provides a comprehensive investment recommendation for Seek Limited, a public company specializing in online employment services. It begins with an executive summary and an overview of Seek Limited, including its history, market capitalization, and industry focus. The report then delves into a detailed financial analysis, examining gross revenue, operating profit, individual sector revenue, and corporate strategy. It also includes an analysis of shareholder value-generating initiatives, Porter's Five Forces, and a SWOT analysis to assess the company's competitive position. The report further explores investment risks, equity valuation, and industry trends, culminating in an investment thesis and recommendation. Key financial data, including important ratios and a Dupont analysis, are presented to support the conclusions, enabling investors to make informed decisions regarding the company's securities.

Investment Analysis

Table of Contents
EXECUTIVE SUMMARY.............................................................................................................1
ABOUT THE COMPANY..............................................................................................................2
Gross Revenue:............................................................................................................................2
Operating profit: ..........................................................................................................................2
Individual sector revenue:............................................................................................................3
Corporate Strategy: .....................................................................................................................3
Shareholder's value generating initiatives: .................................................................................4
Porter Five Forces: .....................................................................................................................4
Investments Recommendation for shares of Seek Limited..............................................................9
Investment Thesis and outcome.......................................................................................................9
Financial data of Seek Limited and its key important ratios:....................................................12
Dupont Analysis:.......................................................................................................................15
Industry Trends / Economic Environment.....................................................................................16
Equity Valuation:.......................................................................................................................21
Stability of performance............................................................................................................26
Competitive Positioning.............................................................................................................27
Investment Risks: ......................................................................................................................27
Conclusion.....................................................................................................................................28
REFERENCES................................................................................................................................1
Appendix:.........................................................................................................................................3

EXECUTIVE SUMMARY
This reports exhibits investments Recommendation for shares of Seek Limited along with
a sharp analysis by using various analysis such as SWOT analysis, porter's five forces model etc.
Seek Ltd.'s performance is compared with its top competitors in terms of gross revenue,
Individual sector revenue, Corporate Strategy, Management structure, Shareholder's value
generating initiatives, Financial data of Seek Limited and its key important ratio, Dupont
Analysis, Equity Valuation, Stability of performance, Competitive Positioning and Investment.
This comparison shows that Seek Ltd has negative growth in current year which is temporary
due some major acquisitions. Risks related with Seek Ltd' s securities. Financial data of Seek
Limited are interpreted with the help valuation of share of Seek Ltd by various model. This
report enable investors to take decision about buy, sell or hold securities of Seek Ltd.
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ABOUT THE COMPANY
SEEK Limited is a public company which was founded in November 1997 by Paul
Bassat, Matt Rockman and Andrew Bassat and its website was launched on March 1998. With
market capitalisation of $587 million, Seek was listed on the Australia Securities Exchange on
18 April 2005. Seek Limited is focusing on employment opportunities between job seekers and
companies which are in search of employees. It ranked at 322 out of top 2000 companies of the
Australia and majority of income is generated by Seek Limited from the Internet Publishing and
Broadcasting in the industry of Australia. In 2018, Seek Limited had generated a total revenue of
$ 1328400000 which include sales and other revenue (Annual Report of Seek Ltd., 2018). Chief
Executive officer of the company is Mr. Andrew Bassat and Non Executive Chairman of the
company is Mr. Neil Chatfield. Seek Limited provide online employment advertisement services
through its website and also provide online vocational training and education training courses in
Australia, New Zealand, China, India, Brazil, Mexico, Indonesia, Nigeria, Bangladesh,
Philippines, Vietnam, Thailand, South Africa, Kenya, Malaysia, Hong Kong and Singapore.
Gross Revenue:
Gross revenue or gross income, is the aggregate sum of all revenues or incomes before
any expenses during a particular period. Gross revenue includes all monetary income or revenue
made from the sale of goods and services, income from interest, sale of shares, exchange rates
and sales of fixed assets. Company's income statement shows gross revenue for a particular
period. Net revenues calculated by subtracting cost of goods sold from gross revenue. Seek Ltd.
has AUD 1295 million gross revenue in 2018 and achieved a growth of 25% in gross revenue
(Bessler, 2015).
Operating profit:
Operating profit is income that remains after deducting all the costs related to the
business. It includes cost of goods sold such as fixed-cost expenses like rent and insurance,
variable-cost expenses like shipping and freight, payroll and utilities, as well as amortization and
depreciation of assets (Bierman, 2012). All the expenses related to business should be included
in operating profit,
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Operating Profit = Gross Revenue - COGS - Operating Expenses - Depreciation and
Amortization. Seek Ltd. Has AUD 318 million operating profit in 2018 and achieved a growth of
approx. 24.7% in operating profit.
Individual sector revenue:
An organisation dealing in different-different fields, divides its revenue from all fields
sector wise. The Group recognises revenue when the amount of revenue can be reliably
measured, it is probable that future economic benefits will flow to the entity and specific criteria
have been met. Seek Ltd. Divides its revenue in following sectors:
Sector Income($ m )
SEEK ANZ 393.4
SEEK Asia 141.6
Brazil Online 76.4
OCC 29.2
SEEK Learning (Old) 30
ESVs 31.2
Zhaopin 433
Online Education Services 107.2
THINK 31.4
Other Businesses 21.6
Corporate Strategy:
The term corporate strategy to outline decisions a company should make to achieve its
goals and create policies to achieve them. Corporate strategy is the guideline an organization
uses with the objective of achieving business success in long term. A flexible strategy should be
adopted an organisation in a dynamic business environment. A corporate strategy is developed
while considering the purpose and scope of the organization's activities and the nature of the
business, the environment in which it operates, position in the marketplace, and the competition
it faces. Seek ltd uses vertical integration by focusing on greater control over an operatins
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process by integrating a key segment. However, sometimes uses horizontal integration by taking
the existing services and acquires new business operations.
Management structure:
A management structure is way by which a company organizes its management chain.
Management structures is a systematic chain of authority, communications, rights and duties of
an organization (Blomstrom, 2014). Management structure defines roles, power and
responsibilities are assigned to different levels of management. It depends on the organization's
goals and culture. Seek ltd has a put under one control structure, the top level of business
managers has most of the decision making power and has tight control over departments and
divisions. In a gave self-government structure, the decision making power is made distribution
and the departments and divisions may have different degrees of self -direction. In this context,
in Seek Ltd has very few levels of management between the president or CEO, and the lower-
level employees, Which enable Seek Ltd for rapid decision making due to only a few levels of
management.
Shareholder's value generating initiatives:
Seek Ltd always gives top priority to enhance shareholder's value. Company not only
focusing on earning on short term basis but also towards shareholder's wealth creation. Seek ltd
takes initiatives in order to maximise the shareholder's value such as making acquisitions that
maximize value, even at the expense of lowering near-term earnings, tries to carry only those
assets that maximize value, by returning cash to shareholders when there are no credible value-
creating opportunities to invest in the business, by rewarding CEOs and other senior executives
for delivering superior long-term returns, by Reward operating segment executives for adding
superior value and by requiring senior executives to bear the risks of ownership just as
shareholders do.
Porter Five Forces:
It is a comprehensive strategy model used in strategic decision making activities by
analysing the present competition. In the context of Seek Ltd, Porter Five Forces focuses on -
how Seek Limited can build a sustainable competitive advantage in Commercial & Professional
Services industry (Zhuo-hua, 2015). Managers at Seek Limited can not only use Porter Five
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Forces to develop a strategic position with in Commercial & Professional Services industry but
also can explore profitable opportunities in whole Commercial & Professional Services sector.
Michael Porter's five forces model identifies key factors that have significant impact on a firm's
profitability in the industry it operates in. following are the Porter's Five Forces -
 Threat of New Entrants
 Bargaining Power of Suppliers
 Bargaining Power of Buyers
 Threat from Substitute Products
 Rivalry among the existing players.
Seek Limited Porter Five Forces Analysis:
Threats of New EntrantsThreats of New Entrants:: Bargaining Power of SuppliersBargaining Power of Suppliers::
New entrants brings new thing, new ways of
doing things and put efforts on reducing price
while providing new services. Seek Ltd can
handle this threat by developing new
products and services. New services not only
brings new customers to the fold but also
give old customer a reason to choose Seek
Limited ‘s services.
Companies in the Commercial &Companies in the Commercial &
Professional Services industry areProfessional Services industry are
outsourcing some services from third parties.outsourcing some services from third parties.
Such third parties are deemed as suppliers inSuch third parties are deemed as suppliers in
Commercial & Professional ServicesCommercial & Professional Services
industry. These third parties use theirindustry. These third parties use their
bargaining power to extract higher pricesbargaining power to extract higher prices
from the companies (Briston, 2017). Thefrom the companies (Briston, 2017). The
overall effect of higher supplier arriving at anoverall effect of higher supplier arriving at an
agreed price or set of terms for an exchangeagreed price or set of terms for an exchange
power is that it lowers the overall a money-power is that it lowers the overall a money-
making state of Commercial & Professionalmaking state of Commercial & Professional
Services. Seek ltd can handle this threat byServices. Seek ltd can handle this threat by
building efficient supply chain with multiplebuilding efficient supply chain with multiple
suppliers.suppliers.
Bargaining Power of BuyersBargaining Power of Buyers:: Threats of SubstituteThreats of Substitute::
Service receiver want quality services byService receiver want quality services by This threat occurs when a new product orThis threat occurs when a new product or
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paying the minimum price as possible thatpaying the minimum price as possible that
affects Seek Limited profitability in the longaffects Seek Limited profitability in the long
run. Seek Ltd can handle this threat byrun. Seek Ltd can handle this threat by
building a large base of customers that helpsbuilding a large base of customers that helps
to reduce the bargaining power of the serviceto reduce the bargaining power of the service
receivers and provides an opportunity to thereceivers and provides an opportunity to the
firm to optimise its costs.firm to optimise its costs.
service meets a similar customer needs inservice meets a similar customer needs in
different ways. Seek Ltd can handle thisdifferent ways. Seek Ltd can handle this
threat by increasing expense towards researchthreat by increasing expense towards research
on providing new or unique services whileon providing new or unique services while
understanding the core need of the customer.understanding the core need of the customer.
Rivalry among the Existing Competitors:Rivalry among the Existing Competitors:
Rivalry among the existing players in an industry affects prices and decrease the overallRivalry among the existing players in an industry affects prices and decrease the overall
profit margin of the industry. Seek Limited operates in a very competitive Commercial &profit margin of the industry. Seek Limited operates in a very competitive Commercial &
Professional Services industry, that affects its overall long term profitability of theProfessional Services industry, that affects its overall long term profitability of the
organization (Broomhead, 2012). Seek Ltd can handle this threat by building scale so that itorganization (Broomhead, 2012). Seek Ltd can handle this threat by building scale so that it
can compete better or by collaborating with competitors to increase the market size rathercan compete better or by collaborating with competitors to increase the market size rather
than just competing for small market.than just competing for small market.
SWOT analysis
The SWOT Analysis tool used by an organization to identify the internal strategic factors
such as -strengths and weaknesses, & external strategic factors such as - opportunities and
threats. In SWOT analysis a matrix is created which helps the managers to analyse four types of
strategies:
 SO (strengths-opportunities) Strategies
 WO (weaknesses-opportunities) Strategies
 ST (strengths-threats) Strategies
 WT (weaknesses-threats) Strategies
Seek Limited SWOT Analysis: The main purpose of SWOT matrix is to identify the strategies
that a firm can use to explore external opportunities, threats, strengths and weaknesses.
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Strengths: Weakness:
Seek Limited has many strengths that assist
to maintain market share. These strengths not
only assist in retaining the market share in
existing markets but also help in developing
new markets. Seek Ltd has strengths like
favourable returns on capital investments,
Large distribution network, Great Brand
Portfolio, Good Free Cash Flow condition,
controlled execution over Automation of
activities, High level of customer satisfaction
etc.
Weakness are fields in which improvement is
required. This analysis helps to identify the weak
areas where a company can improve and build on
its competitive advantage (Chandra, 2017). Seek
Ltd has weakness such as Seek ltd. has not being
able to handle the challenges created by the new
entrants in the segment and has lost small market
share in the niche segment, Profitability ratio and
net Contribution percentage of Seek Limited are
below the industry average.
Opportunities: Threats:
Opportunities refers to external factors that
creates favourable conditions for an
organisation. In present situation there are
many opportunities for Seek Ltd. In industry
such as latest trends in the consumer taste
and preferences can develop a new market
for the Seek Limited, proposed
environmental policies, Government's recent
flexible opens an opportunity for
Threats refers to external factors that creates
unfavourable conditions for an organisation. In
present situation there are many threats for Seek
Ltd. in industry such as development of new
technologies, Changing consumer buying
behaviour, Growing strengths of local distributors
etc.
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procurement of Seek Limited services or
products, Recent development of new
markets due to government policies, lower
inflation rate etc.
.
Investments Recommendation for shares of Seek Limited
Investment recommendation means advising or indicating an investment approach in
relation to one particular security or particular industry, while considering financial data or other
relevant information, and opinion based on present or future price of security. Investment
recommendation mainly includes advises such as - whether to buy, sell or hold securities. As per
present scenario investors should hold the securities of Seek Ltd. In order to gain more returns in
near future. From the previous records, it can be seen that previous performance of company
shows favourable growth, however in 2018 there is negative growth in share prices, revenues,
net margin as compared to competitors (Arrow, 2013). This negative growth is temporary
because Seek Ltd is able to re achieve positive growth due to its other subsidiaries and acquired
companies. In this context present valuation of Seek Ltd by different-different methods shows
unstable picture due to negative net margin, negative working capital and negative overall
growth, so investors should hold their securities.
Investment Thesis and outcome
Investment thesis aims to evaluate investment ideas and guide the investor whether to
purchase or sell or hold the stock. Investor will purchase a securities based on the investment
thesis that security is undervalued (Baker, 2014). It also states the investor plans to hold the
security for several years, during which an investor expects that its price of stock will rise and
true worth of stock will reflect.
Why Buy or Sell or Hold
If a value of stock is less than the value it expected to be, then investors will buy that
security since the current value of stock is undervalued and the price of security is expected to
rise in future, so in order to gain profit investors sell their securities (Berghout, 2013). Similarly,
if value of stock is more than the value it expected to be, then that means value of that stock is
overvalued and it is expected that its value will be decrease in future, so the stock will be sold at
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present in order to avoid future loss. And if the value of stock is same as it expected to be then
the stock will be hold for future.
Industry Outlook
While making investment, it is very important to study the industry outlook that is
forecasting about future trends of a particular company, stock market exchange, economic
segments and community. The market outlooks are based upon the various factors like past
performance of the company, economic factors prevailing in the industry and the demand and
opinion of the consumer. The new investor will always study the industry outlook before making
investments in a company of any industry and then take any decision to buy the stock or not.
Major competitors of Seek Ltd.
Seek Ltd. Is operating in Commercial & Professional Services industry, in which
competition helps to make company's products, services and marketing be distinct. It enables
company to fix prices of product competitively and help to respond to rival marketing
movements with your own actions (Damodaran, 2016). Competitor could be a new business
offering a substitute or similar product that could be harmful for organisation. These following
are the major competitors of Seek Ltd.:
Indeed: Indeed is Seek Ltd's top competitor with approx 2200 employees and revenue of
$973.8M. Indeed, is a Private company that was founded in 2004 in Austin, Texas. Indeed is in
the Internet Software industry. Compared to SEEK, Indeed has 1,371 more employees.
Freelancer.com : This is the world's largest freelancing and crowdsourcing marketplace
by number of users and projects. Freelancer connects over 31,396,904 employers and freelancers
globally from over 247 countries, regions and territories and through company's marketplace,
employers can hire freelancers to do work in areas such as software development, writing, data
entry and design right through to engineering, the sciences, sales and marketing, accounting and
legal services (Mihályi, 2012).
Performance of Seek Ltd.
2014 2015 2016 2017 2018
Revenue %
Year over Year 15.01 20.34 10.72 9.05 24.9
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