Overview Of SEEK Limited And Its Board Of Directors, Management, Stock Performance And Financial Analysis

CEO and Board of Directors

SEEK Limited along with its subsidiaries provides service market place for online employment in Australia and various other countries. It helps the people to lead more productive and satisfactory working lives and coordinates between the hirers and job seekers (Seek Limited 2018). General information regarding SEEK Limited is as follows –

The chief executive officer of SEEK Limited, Andrew Bassat, aged 51 is working as CEO of the company since September 1997. He is responsible for all the development stages of the company’s business as he was the co-founder of the company in 1997. Further, he was appointed as the director of St. Kilda Football Club (Seek Limited 2018).

At present the company has 7 directors in their board including the CEO. Details of the directors are as follows –

Superannuation and base salary paid to the executives is set out for 50% of the total remuneration. The executives are paid 1 equity share at 25% of the total remuneration that is converted to number of shares after vesting. Equity shares are issued under the performance option and rights plan (PROP). Further, the executives are issued various options for LTI those are valued at 25% of the total remuneration that can be vested after fulfilling the performance hurdle (Shao, Kwok and Guedhami 2013).

Executive remuneration details –

Above presented figure 1 represent the movement of share volume and share price changes from the period from 1-1-2012 to 12-31-2017. On the other hand, figure 2 represents the interactions of changes in return percentage of SEEK Limited’s share as compared to the changes in the All Ordinaries Index share from the period from 1-1-2012 to 12-31-2017 (Seek Limited 2018). Over the period under consideration the share price return of SEEK Limited was highly variable and fluctuating as compared to the return of All Ordinary Index. The share price of SEEK Limited has been changed from 4.216577 to 19.206221 whereas the share price of All Ordinaries Index has been moved from 4325.70 to 6146.50 over the same period (Paradi and Zhu 2013).

The company is responsible for providing fulfilling and productive working lives and helps the job seeker to coordinate with the hirers. It is socially responsible for providing web based platform for providing opportunities over cross cultural mission along with the searchable portal of the company’s website.  The company also make positive contribution to community under which it operates and the company is focussed to obtain more value from the investments it made and prioritise them to long-term strategic approach.

Stock Performance

Risk score is the relevant measure to assess the attractiveness of the stock. It shows that the risk score of SEEK Limited is 7.00 (Analytics 2018). The risk score of ‘0’ represents that the company is exposed to high risk and on the contrary ‘10’ represents the company is exposed to low risk. However, the risk score of SEEK Limited is higher as compared to its competitors. It signifies that the company is considerably low risky as compared to its peers (Kou, Peng and Wang 2014).

Risk score is the relevant measure to assess the attractiveness of the stock. It shows that the risk score of SEEK Limited is 7.00 (Analytics 2018). The risk score of ‘0’ represents that the company is exposed to high risk and on the contrary ‘10’ represents the company is exposed to low risk. However, the risk score of SEEK Limited is higher as compared to its competitors. It signifies that the company is considerably low risky as compared to its peers.

It can be identified from the above calculation table that the mean return of All ordinary index is 0.0054 whereas the mean return of SEEK Limited is 0.0250. Therefore, the mean return of SEEK Limited is better as compared to the mean return of All ordinaries index. Standard deviation measures the dispersion of data from the mean (Afonso, Baxa and Slavik 2018). It can be observed that the dispersion of return data from mean SEEK Limited is higher as compared to the dispersion of All ordinaries index as the SD of SEEK Limited is 0.0901 and the SD of All ordinary index is 0.0321. Coefficient of variation measures the variability and is calculated through dividing the SD by the mean return. Variation of All ordinaries index is higher as compared to the variation of SEEK limited as the CV of All ordinaries index is 5.9406 as against the CV of 3.6012 for SEEK Limited.

Calculation of CAPM

E(r) = R_f + β (R_m – R_f) where, E(r) = required rate of return, R_f = risk free rate, β = beta, R_m = market return.

From the above it can be observed that the required rate of return of SEEK Limited calculated through CAPM model comes to 5.597%. Therefore, the investors will expect the return of 5.597% or more.

It can be identified from the above table that the P/E ratio of the company increased from 21.70 to 29.91 over the year from 2013 to 2014 and it reduced to 24.97 in 2015. However, it increased to 26.41 in 2016 and further increased to 26.63 in 2017. Therefore, the price earnings ratio of the company is stable and the company is efficient is providing return to the shareholders and investors.

Risk Analysis

As per the debt rating given by Standard & Poor is BB+ (YieldReport 2018). The company’s rating has been downgraded. Further, the cost of debt for the company was 2.8% for the year ended 2017 as compared to the interest rate of 2.9% for the year ended 2016.

The capital structure of the company is as follows –

From the above it can be observed that in the capital structure of the company 69% is consisted of equity and 31% is consisted of debt. Therefore, it can be stated that the company is lower leveraged as the equity portion is higher as compared to debt portion (Joshi et al. 2013).

Cost of capital

WACC = E/V* K_d + D/V * K_d (1 – t) (Li 2015)

WACC = 0.69*0.0597 + 0.31*0.028 (1-0.174)

WACC = 4.84%

Net profit of the company for the year ended has been changed from $ 141.10 million to $ 220.8 million over the years from 2013 to 2017. The net profit of the company was in increasing trend. The net profit after tax was as follows – 2013 – $ 141.1 million, 2014 – $ 179.7 million, 2015 – $ 193.0 million, 2016 – 198.1 million and for 2017 – 220.8. Therefore, the company is efficient in earning over the last 5 years. Further, the cash flows of the company have been increased from $ 504.9 million to 652.0 million over the years from 2016 to 2017. Therefore, the company was efficient in generating positive cash flows over the past years. Therefore, the from investment aspect the company can be considered as a good investment opportunity (Bradford, Chen and Zhu 2013).

Profitability ratios –

Activity ratios –

Out of the total borrowing of $ 238 million of the company, $ 263 million were raised through bank loan on long term, $ 175 million were raised from Euro medium term note and the amounts covered through interest rate swaps that was reduced from the entire borrowing amounted to $ 200 million (Wahlen, Baginski and Bradshaw 2014).

Finances raised through debt are deductible expense under tax and reduce the overall tax liability of the company. Further, the non-cash expenses like depreciation and amortization also helps to reduce the overall tax expenses of the company (Xu et al. 2013).

The cost of debt for the company was 2.8% for the year ended 2017 as compared to the interest rate of 2.9% for the year ended 2016.

Dividend paid by the company for the past years are as follows –

 Firm characteristics

It can be observed that the company’s dividend policy is to pay constant dividend on the income of the company and over the last 5 years the company is regular in paying dividend to its shareholders. However, announcement of dividend does not really have any impact on the share price of the company (Brooks 2015).  

Conclusions

From the above analysis with regard to the market performance, share performance, profitability analysis and dividend policy of the company it is identified that the performance of the company is quite satisfactory. Further, the performance and risk exposure of the company is better as compared to its competitors. Therefore, SEEK Limited can be considered as good opportunity for the purpose of investment.

Reference

Afonso, A., Baxa, J. and Slavik, M., 2018. Fiscal developments and financial stress: a threshold VAR analysis. Empirical Economics, 54(2), pp.395-423.

Analytics, I. 2018. Seek Limited: Risk analysis (SEK | AUS | Business Training & Employment Agencies) – Infront Analytics. [online] Infrontanalytics.com. Available at: https://www.infrontanalytics.com/fe-EN/AU000000SEK6/Seek-Ltd-/gprv-risk [Accessed 28 May 2018].

Bradford, W., Chen, C. and Zhu, S., 2013. Cash dividend policy, corporate pyramids, and ownership structure: Evidence from China. International Review of Economics & Finance, 27, pp.445-464.

Brooks, R., 2015. Financial management: core concepts. Pearson.

Joshi, M., Cahill, D., Sidhu, J. and Kansal, M., 2013. Intellectual capital and financial performance: an evaluation of the Australian financial sector. Journal of intellectual capital, 14(2), pp.264-285.

Kou, G., Peng, Y. and Wang, G., 2014. Evaluation of clustering algorithms for financial risk analysis using MCDM methods. Information Sciences, 275, pp.1-12.

Li, X., 2015. Accounting conservatism and the cost of capital: An international analysis. Journal of Business Finance & Accounting, 42(5-6), pp.555-582.

Paradi, J.C. and Zhu, H., 2013. A survey on bank branch efficiency and performance research with data envelopment analysis. Omega, 41(1), pp.61-79.

Seek Limited. 2018. About SEEK. [online] Available at: https://www.seek.com.au/about/ [Accessed 28 May 2018].

Shao, L., Kwok, C.C. and Guedhami, O., 2013. DIVIDEND POLICY: BALANCING SHAREHOLDERS’AND CREDITORS’INTERESTS. Journal of Financial Research, 36(1), pp.43-66.

Wahlen, J., Baginski, S. and Bradshaw, M., 2014. Financial reporting, financial statement analysis and valuation. Nelson Education.

Xu, Y., Carson, E., Fargher, N. and Jiang, L., 2013. Responses by Australian auditors to the global financial crisis. Accounting & Finance, 53(1), pp.301-338.

YieldReport. 2018. SEEK bond market debut YieldReport. [online] Available at: https://www.yieldreport.com.au/news/seek-bond-market-debut/ [Accessed 28 May 2018].

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