Shares in Seek take a tumble
SEEK shares have fallen from nearrecord highs despite the job ads group upgrading its full- year earnings forecast.
Shares in the group fell 3.6 per cent yesterday – their biggest single- session fall in more than a year – cutting almost $ 250 million from its market value.
But it came just two days after they hit a record high closing price of $ 19.41, having rallied almost 30 per cent over the previous year.
The dip yesterday came despite an upgrade to Seek’s forecast growth in earnings before interest, tax, depreciation and amortisation for the year to next June.
Chief executive Andrew Bassat told investors at its annual meeting that earnings were now expected to swell about 13 per cent from last financial year, up from an earlier growth forecast of 10 per cent.
Shares in the group spiked shortly before Seek published the revised forecasts in documents – released to the Australian Securities Exchange about 11.45am – ahead of the meeting in Melbourne.
They tumbled in afternoon trade as investors digested the details of the trading update.
CMC Markets chief strategist Michael McCarthy said it was extraordinary that Seek shares had traded within a range of more than 5 per cent over one day.
“Investors are having a hard time making up their mind about this one,” he said. “We are now moving towards the bottom of that ( 5 per cent) range, so on balance the market is less than impressed.”
Mr McCarthy said investors had factored in a positive outlook from the online jobs board operator, which has a market value of $ 6.56 billion.
“Perhaps to some extent Seek is a victim of its own success – it’s been trading at all- time highs in the leadup to this outlook statement,” he said.
Mr Bassat told shareholders the earnings performance of the group’s Australian and New Zealand operations, Seek Asia and online education services so far this financial year had been encouraging.
But the company would have higher- than- expected interest costs related to its Chinese subsidiary, Zhaopin, he cautioned.
Interest expenses would be higher than expected due to higher debt on Zhaopin’s balance sheet, he said.
Zhaopin was previously listed on the New York Stock Exchange, but Seek – in partnership with private equity houses Hillhouse Capital Management and FountainVest Partners – took it private last month.
The Australian group still expects a profit in the range of $ 220 million to $ 230 million for the year to next June before accounting for investments of about $ 25 million in new business ventures.
Chairman Neil Chatfield told shareholders that the company’s Australian and New Zealand business was “most advanced in its growth evolution” after a long period of reinvestment, while almost two- thirds of group revenue now came from international operations.
Seek’s success in its home markets had “reaffirmed that reinvestment is the right strategy for our international businesses which offer much larger revenue opportunities”, he said.