Seek puts short attacks behind it as investors applaud sunnier outlook

ASX-listed Seek has put the recent short seller attacks behind it with the online employment giant’s latest trading update pointing to a post-COVID revival for the business.

The $8.1 billion company came under pressure last month after Texas-based activist short seller Blue Orca raised doubts about the strength of Seek’s prized Chinese business Zhaopin. While Seek shares took an immediate hit on the back of the Blue Orca attack, investors have since started to warm to the stock. Seek’s shares hit an intraday record high last week of $26.45 and the company’s revised guidance has seen UBS and other analysts upgrade the stock.

Seek, which pulled guidance earlier this year and cancelled its final dividend as the pandemic hit, expects revenue for the current financial year to land around $1.6 billion. Earnings before interest, tax, depreciation and amortisation (EBITDA) for the period is set to come in at $400 million and reported net profit is forecast at around $50 million, well above market expectations of $20 million.

Seek CEO Andrew Basset is now guiding for much strong revenue and earnings growth this year.
Seek CEO Andrew Basset is now guiding for much strong revenue and earnings growth this year.Credit:Jesse Marlow

Despite the upgraded guidance, UBS analyst Eric Choi still believes Seek is being conservative and forecasts EBITDA could be as high as $425 million for the year ending June 30, 2021.


“We feel new guidance could still be conservative based on the strength of current listings momentum,” he said.

Mr Choi said earnings upgrades for the following financial years could be more moderate as he suspects part of the current upside is a “pull-forward” reflecting a return to pre-COVID volumes of job ads in Australia.

Meanwhile, Morgans analysts said the latest revenue upgrade from Seek helps to address concerns about debt leverage. More importantly, Morgan’s Anthony Porto said it demonstrates the growth potential of the company’s Australian operations.

“The insinuation that the core business is low growth doesn’t stack up in the near term at least, with a rebound in economic conditions post-COVID, and a yield improvement in the ANZ business, driving solid bottom line growth,” he said.

Blue Orca is yet to comment on the latest guidance from Seek. Last month the short seller said Seek’s shares could be worth as little as $7.20, alleging that Seek was using debt to hide the lacklustre performance of its businesses.

“Rather than valuing Seek as a fast-growing online recruiting platform, we value Seek for what it is — a slow or no-growth platform whose core business is shrinking and which carries a dangerous amount of debt,” the original report stated.

Seek has refuted the allegations, with chief executive Andrew Bassat and company chairman Graham Goldsmith both labelling Blue Orca’s report inaccurate.

Morgan’s Mr Porto added that the potential sale of a stake in Zhaopin could be another catalyst for the recent rise in Seek’s share price, which last traded at $25.55.

He said a sale could introduce a strategic partner to help drive Zhaopin’s growth, but just as importantly, it would “provide external validation of the Zhaopin business model and valuation”.

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