Stock of the Week: Seek

Digital job ads platform, Seek, has confirmed that its Chinese digital jobs classifieds business, Zhaopin, is speaking to potential investors amid speculation e-commerce giant Alibaba could invest “hundreds of millions of dollars” in the company.

SEK told the markets that Zhaopin and its shareholders were in discussions with “a number of parties” about new investment to support Zhaopin’s long-term growth. It did not name Alibaba directly and mentioned that the discussions may or may not lead to anything.

I asked my guests on The Call, Rudi Filapek-Vandyck from FNArena and Carl Capolingua from ThinkMarkets, whether they’d recruit SEK for their portfolio. Rudi thinks the company’s Chinese business has been its saviour.

“Online classified businesses in Australia have emerged strongly over the past decade including RealEstate.com, Carsales.com and Seek.com. I have never owned Seek as it’s seen increasing competition coming in from overseas from the likes of Linkedin… as we have seen during this pandemic, job ads are more vulnerable than second-hand cars or property.

“The cat is out of the bag now. We know they’re doing something and I think the market will respond positively. But beyond the China story, I still think they have a problem economically and the labour market in Australia is not going to look better next year. It’s a no for me.”

Carl agrees with Rudi and thinks that COVID has impacted the business negatively.

“Zhaopin is the jewel in the crown. The rumours are Alibaba is looking to take a minority stake in the business. I wouldn’t get too excited as it may see a return on investment but won’t affect SEK’s share price drastically.

“Looking at its last results, growth in the business is about 16% per annum which has only been lifted by its Chinese business Zhaopin. Due to COVID, you’re looking at about a 25 per cent drop in their earnings over the next 12 months.

“The stock isn’t cheap by any stretch of the imagination and doesn’t really have a great growth story in the near future. I can’t see any great reason to buy it on the fundamentals and the technicals so double no for me.”