SEEK Limited

SEK Details

FY17 result supported from ANZ & Zhaopin: For FY17, SEEK Limited (ASX: SEK) reported a fall in its net profit after tax to $340.2 million from $357.1 million a year ago at the back of significant items. There was an 11% year on year (yoy) growth in underlying NPAT (excl. significant items & Early Stage Ventures) at A$220.8m. Revenue grew by 14% yoy to A$1,036.4m, and EBITDA grew by 11% yoy to A$362.3m. Zhaopin achieved total revenue growth of 24% alongside aggressive reinvestment, while SEEK Asia is starting to realise reinvestment benefits. Further, Zhaopin’s privatisation is progressing well and partnership with Hillhouse and FountainVest is expected to deliver strategic and operational benefits. Additionally, OES increased its ownership to 80% which is expected to unlock value by opening ability to sign new education partnerships. This strategy was vindicated by the new partnership with Western Sydney University which positions OES to grow in the large NSW market. Importantly, OES transaction is expected to be strongly cash accretive over medium to long term. SEEK ANZ achieved a record result with strong revenue growth of 14% to A$355.9m and EBITDA growth of 11% to A$197.9m. ANZ Employment delivered another strong financial result and continues to grow its market leadership. SEEK International achieved a creditable result with revenue growth of 6%, however, EBITDA declined by 3% (Revenue A$629.3m, EBITDA of A$187.0m). However, in constant currency, it has reported a revenue growth of 13% and EBITDA growth of 2%. On guidance front, the company expected to report a revenue growth of 20% to 25% (FY18 vs FY17), EBITDA growth of approximately 10% (FY18 vs FY17), and reported NPAT in the range of A$220m to $230m.

Stock performance and recommendation: The stock declined 3.2% post the results announcement on August 16, 2017 and this may be owing to short-selling. The stock has otherwise moved up 18.8% in the last six months (as on August 16, 2017). Given the mixed results, signs of improvement in macro picture, realization of reinvestment benefits from SEEK Asia coupled with an optimistic outlook, we maintain a “Hold” recommendation at the current price of $ 17.26

Seven West Media Limited

SWM Details

Full year loss impacted the stock: Seven West Media (ASX: SWM) stock fell 2.5% on August 16, 2017 as the group reported an underlying profit after income tax, excluding significant items net of tax of $166.8 million on total revenues of $1,679.4 million. EBITDA of $306.7 million is down from $363.5 million in the corresponding period with EBIT of $261.4 million. The company reported a statutory net loss of $745.0 million for the year compared to the previous year statutory net profit of $184.3 million. Significant items of $988.8 million for the period, included the impairment of intangibles, equity accounted investees, other assets including fixed assets, restructuring costs, onerous contracts and net loss on disposal of investments. Moreover, the reduction in the carrying value of the television assets represented the largest proportion of these write downs. Further, softer free to air market conditions and a revision in growth assumptions for the market outlook have impacted the carrying value of the television licence and certain sports rights. A final dividend of 2 cents per share (fully franked) has been declared.

As at 24 June 2017, Seven West Media had net assets of $418.9 million and net debt of $725.7 million with the debt leverage ratio of 2.4x EBITDA. In October 2016, the Group extended its debt facilities for a further two years with no changes to covenants or undertakings, out to an expiry date of October 2020.


Financial summary; (Source: Company reports)
 
Stock recommendation:On FY18 guidance front, underlying EBIT is expected to be 5% lower than FY17 due to challenging advertising conditions. However, the company expects the broadcast metro market to outperform FY17 and are targeting increased share.  The company is targeting cost savings in the financial year to more than offset the AFL uplift in FY18 with a further incremental cost savings to be delivered in FY19 on FY18. We maintain a “Buy” recommendation on the stock at the current price of $ 0.77

Computershare Limited

CPU Details

Rise in Revenue:For FY17, Computershare Limited (ASX: CPU) reported 10.6% yoy revenue growth at $2,182.5m, while posting 4.6% yoy growth in EBITDA at $557.2m. Results were achieved despite cyclically depressed Corporate Actions revenue, weakest since 2005, the lowest margin income yield in CPU history and a higher tax rate. Free cash flows increased by 7.9% to $362.2m. Growth engines of mortgage services and share plans are performing to plan and cost management strategies are driving the profitability. As the company continues to simplify CPU and recycle capital, the balance sheet continues to deleverage, creating additional capacity to enhance shareholder returns. Further, the company announced an AUD 200m share buy-back and an 11.8% increase in the FY17 final dividend.  Net debt excluding non-recourse SLS advance debt fell by $260.8m to $867.7m and Net debt to EBITDA leverage excluding non-recourse SLS Advance debt stood at 1.60 times, down from 2.12.

In constant currency, Computershare expects FY18 EPS to increase by around 7.5% on FY17. Consistent with FY17 guidance approach, this guidance assumes FY17 average exchange rates that are used to translate the FY18 earnings guidance to USD.

Stock recommendation:The stock declined 3.3% post the results announcement, while it has been up 42% in the past one year (as on August 15, 2017) because of better performance across business verticals. Given the current trading levels, we maintain an “Expensive” recommendation on the stock at the current market price of $ 13.97

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