job decline presents buying opportunity

market may be overreacting to sheen's jobs survey out recently and has beaten the price down too hard.

so might be worth a look
It has a nice set of numbers
growth rate of about 40%
zero debt
return of equity of around 50%
a fairly strong moat except such a high ROE may encourage a competitor to come into the Aussie market eg Google
It would have to however overcome strong brand loyaty
Main problem is that it has a high PE (20) and low divi yield less than 3% which means the price will fluctuate a bit
Also 20 means it is priced to perfection
It was originally trading at $9 prior to the downturn. It is now 40% down on that price.

whatever happens it has a great future as people migrate away from print media to the internet.


recommendations and target prices include

Credit Suisse outperform $6.94
Deutsche Bank Buy $8.10 65.3%
ABN Amro Buy $6.57 34.1%
Macquarie Outperform $7.53 53.7%
Citi hold high risk $6.96 42.0%
JP Morgan Neutral $7.10 44.9%
UBS Neutral $8.40 71.4%

Huntley's has it down as a buy up to $6.30
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Early signs of a contraction


SEK calculates a monthly employment index which measures the ratio of new jobs ads to job applications. The index aims to identify the level of supply and correlate this with demand. This index for March is down 4.9% on an annual basis, indicating a slow down in job ads with a rise in applications.


Partner in the survey, Professor Peter Sheehan Director for the Centre for Strategic Economic Studies at Victoria University says "The fall in the index in March 2008 mainly reflected falls in the three eastern seaboard States of NSW, Victoria and Queensland (with falls for the month of 2.9%, 3.6% and 3.4% respectively). Over the past year the decline in the index has been most pronounced in NSW, with a decline of 9.8% over the year. For NSW, the value of the Employment Index is well below the national average, and this State is likely to be especially affected by a pronounced slowing in the economy."


Further: "Trends in the SEEK indicators over the past few months have no parallel in the last six years of the SEEK data. Taken together with other data, they clearly indicate that the Australian economy is at a cyclical turning point after a long period of sustained growth. The full extent of the slowdown, and its impact across the regions of Australia, will be affected by many national and international factors, the upshot of which remains uncertain".


On recent ABS statistics Australian employment growth is simply starting to slow, a view the SEK figures confirm, though on all accounts NSW looks a tougher case. Overall Australian trends have not turned negative and it would appear to take quite some time for that to emerge, if it were to.


We think SEK can offset a cyclical slowdown by growing its business into immature sectors. For example less than 5% of government employment advertising is directed to online. Education, Healthcare and blue collar have been slow to adapt to online for finding staff. In an environment of cost pressure the attraction of online in comparison to print becomes more appealing. A downturn could accelerate the migration.


SEK has capacity to reduce its costs structure. Marketing in particular is a variable expense which can be curtailed. Many of the sales representatives have bonuses linked to activity so a slowdown would naturally diminish this expense. SEK is also expanding its educational services which are counter cyclical to employment growth.


Prospects from the education sector are bright. Through its core employment classifieds division, SEK has built a database of 1.4m jobseekers. These are people actively seeking career improvement and are a highly valuable pool to market further education. Every employment search builds a deeper profile into what style of job, level, etc each Seek user is looking for and allows for tailored direct marketing. SEK links relevant training to employment classifieds and jobseekers suggesting training that allow jobseekers to fill skills gap. This is the first step in making use of a valuable database of jobseekers beyond simple classified listings. Currently banner advertising remains less than 10% of SEK classifieds revenue.


According to SEK management the education industry has previously been run in an unsophisticated manner. SEEK Learning began by offering relatively simple IT certification courses but through partnerships, has expanded offerings considerably. The aim is to create a one-stop career related education and training service which, given SEK's strong brand name from employment classifieds, SEK appears a natural provider. SEK partners with education providers who supply the content and will grow through a greater breadth of offerings.


Earnings and margins should grow substantially through a combination of employment markets, continued migration from print classifieds to online media, a strong distribution network and strong brand name, increased proportion of higher-priced Small-to-Medium Enterprises (SME) listings, as well as improved products and pricing. The virtuous cycle of existing dominance is a powerful barrier to entry. Strong operating leverage and minimal capex translates revenue growth into strong free cash flow but a high PER and low yield means any disappointment will sharply impact share price.