When it comes to employment in Australia there is one company in particular which dominates the job market. That company is of course the outstanding SEEK Limited (ASX: SEK).
In the last 10 years SEEK has grown enormously under the leadership of its chief executive and co-founder Andrew Bassat. It now commands 33% of the market, which is approximately 8x its nearest competitor according to management.
Developing such a commanding share of the market has of course benefitted SEEK financially. Back in 2006 it was a small cap share pulling in revenue of just over $100 million and net profit of $34 million. Fast forward to today and it's part of the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) and pushing on $1 billion revenue with $195 million profit expected by management in the current fiscal year.
Long-term shareholders have been rewarded handsomely thanks to its shares producing a total shareholder return of 14.1% per year during this period. The question now is how long can this continue?
Fortunately due to its international aspirations I believe it can continue for some time. A big part of the reason why the company is on track to reach $1 billion revenue this year is the stunning growth of its international segment.
Half-year revenue in this segment grew 34% from $222 million to $298 million, completely eclipsing the $152 million domestic revenue during the half. Much of this growth comes from its fledgling China-based subsidiary Zhaopin.
In my opinion the majority-owned Nasdaq-listed Zhaopin is the main attraction to SEEK right now. It is the number one online jobs site in China and contributed $166 million to SEEK's half year revenue.
But its success has caught the eye of private equity firm Sequoia China Investment Management. It made a takeover offer for Zhaopin in May, following a similar offer from a Chinese consortium in January.
The most recent offer values SEEK's stake in Zhaopin at $830 million, and I am pleased to see it has so far failed to gain any traction with the board. I believe this offer is far lower in comparison to the upside that SEEK would lose out on in the future. As far as I am concerned its Chinese subsidiary is some distance from its full potential at present.
I feel certain SEEK will be a great long-term investment if it continues to hold onto its stake in Zhaopin. It will still have a very strong business without it, but it would lack the spark that a lot of investors may look for. If it sold the stake I wouldn't be surprised to see some investors jump out of SEEK and into its growing industry peer Freelancer Ltd (ASX: FLN).
