SEEK Limited

Strong Revenue Growth Alongside Strategic Investment: SEEK Limited (ASX: SEK) has a strong portfolio of employment, education and volunteer businesses. The company is engaged in online sourcing and placement of candidates, provision of higher education services, online matching of hirers and candidates, etc.

Dividend Update: The company recently updated that it will be paying a dividend of AUD 0.2200 per ordinary fully paid share, on 03 October 2019.

FY19 Performance: During the year, the company generated revenue amounting to A$1,537.3 million, up 18% on the prior corresponding revenue of A$1,299.5 million. Reported EBITDA for the period amounted to A$455.0 million, up 6% on the prior corresponding period value of A$431.2 million. Underlying NPAT for the period stood at A$229.0 million, as compared to A$228.5 million in the prior corresponding period.


FY19 Financials (Source: Company Reports)

SEEK ANZ: Despite weaker H2 conditions, the region witnessed revenue growth of 7% and EBITDA growth of 8% on yoy basis. Depth revenue for SEEK ANZ increased by 26%, reflecting the impact of sustained investment in prior years.
SEEK Asia: The region witnessed good financial and operational results with revenue growth of 9% and EBITDA growth of 11% on Constant Currency.

SEEK Investments: Zhaopin was characterised by strong revenue growth of 34% across core and adjacent businesses. Online Education Services (OES) witnessed a growth of 7% in revenue, despite constraints on Australian undergraduate courses. Early Stage Ventures (ESVs) reported strong growth in revenue and overall portfolio valuation with look-through revenue growth of c65% and portfolio valued at A$425 million.

Guidance: In FY20, the company expects to report revenue growth in the range of 15% - 18%. EBITDA for the year is expected to grow in the range of 8% - 11%. Reported NPAT is expected to be between A$145 million and A$155 million.

Stock Recommendation: The stock of the company generated negative returns of 4.71% and 1.48% over a period of 1 month and 3 months, respectively. In FY19, the company continued investing in high returning product, tech and data strategies, which are not providing significant revenue benefit initially. The company has seen early progress in SEEK Asia integration, which requires ongoing investment for 2-3 years. As a result of step-up in investment and weaker macro conditions, the company is under-earnings in FY20. It foresees a lag period before the investments translate into strong revenue growth and expect medium-to-long-term growth in profitability. Stock is currently, trading towards the higher end of its 52-week trading range of $16.27 to $22.940 with a price to earnings multiple of 39.04x. Hence, considering the aforesaid parameters and current trading levels, we suggest investors to closely watch the stock at the current market price of $20.570, up 2.696% on 21 August 2019 and wait for better entry level.
 

Lovisa Holdings Limited

International Store Roll-Out to Deliver Future Growth:Lovisa Holdings Limited (ASX: LOV) is primarily engaged in the retail sale of fashion jewellery and accessories.

Financial Results Release Date: The company recently notified that it will be releasing the financial results for the year ended 30 June 2019, on 22 August 2019.

1HFY19 Financial Highlights: During the first half, revenue was reported at A$133.2 million, up 12.3% in comparison to the prior corresponding period. EBIT for the period stood at A$36.5 million, up 5.1% on prior corresponding period. NPAT for the period was reported at A$25.5 million, up 2.7% in comparison to A$24.8 million in the prior corresponding period. Earnings per share for the period stood at 24.2 cents, as compared to 23.7 cents in pcp. The company also declared a final dividend amounting to 18.0 cents, up on pcp by 5.0 cents.


1HFY19 Performance (Source: Company Reports)

Market-wise Performance: The company witnessed accelerated growth in the European and US markets, with an increase of 12 stores in the UK, 5 stores in France, 7 in the US and 3 stores in Spain. Sales in South Africa witnessed a growth of 10.5% on prior corresponding period, supported by comparable store sales growth and opening of additional stores. Growth in Australia was impacted by softer trading conditions and market outperformance over recent years resulting in negative comparable store sales in the first half. Asia witnessed strong performance with solid sales performance in Malaysia.

Outlook: The company expects an increase in the number of stores for the second half to be higher than the addition in the prior corresponding period. The company is focused on controlling its costs and maintain strong gross margins, while investing in growth of the business.

Stock Recommendation: The stock of the company generated returns of 22.42% over a period of 6 months. During the first half, the company’s gross margin increased to 81.0%. The company continued expanding its global footprints with further opening of 40 stores during the half. Cash flow from operations also increased by 9.4% to $49.1 million. The above factors resulted in growth across key metrics including revenue, EBITDA and NPAT. Store rollout is further expected to deliver benefits in the future. In the first half, the company had an EBITDA margin of 30.7%, which is higher than the industry median of 6.9%. Net margin for the period was 19.2% as compared to industry median of 4.2%.Currently, the stock is priced close to its 52 weeks high level of $12.430 with PE multiple of 34.42x and an annual dividend yield of 2.68%. Investors are suggested to keep a close watch on the stock ahead of its FY19 results which are to be released on 22 August 2019. Given the backdrop of the above factors and current trading levels, we give a “Hold” recommendation on the stock at the current market price of $12.080, up 1.003% on 21 August 2019.

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