AUSTRALIA SEK AU Price (at 06:33, 07 Apr 2017 GMT) Outperform A$16.33 Valuation - Sum of Parts A$ 16.77 12-month target A$ 16.50 12-month TSR % +3.9 Volatility Index Low/Medium GICS sector Commercial & Professional Services Market cap A$m 5,680 30-day avg turnover A$m 20.2 Number shares on issue m 347.8 Investment fundamentals Year end 30 Jun 2016A 2017E 2018E 2019E Revenue m 950.4 1,014.2 1,216.2 1,342.2 EBIT m 307.4 325.1 380.8 432.6 Reported profit m 357.1 180.0 215.3 248.8 Adjusted profit m 187.7 202.1 217.8 248.8 Gross cashflow m 291.2 291.7 335.7 379.9 CFPS 84.7 84.2 96.7 109.4 CFPS growth % 2.8-0.6 14.9 13.2 PGCFPS x 19.3 19.4 16.9 14.9 PGCFPS rel x 1.74 2.13 1.75 1.57 EPS adj 54.6 58.3 62.7 71.7 EPS adj growth % -5.9 6.9 7.5 14.2 PER adj x 29.9 28.0 26.0 22.8 PER rel x 1.55 1.76 1.64 1.47 Total DPS 40.0 42.7 43.9 50.2 Total div yield % 2.4 2.6 2.7 3.1 Franking % 100 100 100 100 ROA % 9.3 9.7 11.0 12.3 ROE % 15.1 14.9 15.8 17.3 EV/EBITDA x 16.3 15.8 13.2 11.8 Net debt/equity % 17.4 23.5 14.6 5.2 P/BV x 4.2 4.2 4.1 3.8 SEK AU vs ASX 100, & rec history Note: Recommendation timeline - if not a continuous line, then there was no Macquarie coverage at the time or there was an embargo period. Source: FactSet, Macquarie Research, April 2017 (all figures in AUD unless noted) 7 April 2017 Macquarie Securities (Australia) Limited Progresses Zhaopin privatisation Event SEEK, Hillhouse Capital Management and FountainVest Partners have entered into a merger agreement with Zhaopin to acquire all the outstanding shares in Zhaopin for US$18.20 per ADS (with one ADS the equivalent of two ordinary shares in Zhaopin). The merger is broadly consistent with previous announcements and would result in the privatisation of Zhaopin. Impact SEEK to retain similar stake in attractive business: As previously flagged, SEEK would retain a similar controlling equity interest (currently 61.2%) in the newly privatised Zhaopin (if the merger proceeds). Zhaopin is one of SEEK s most attractive and fastest-growing assets; in the last half, it grew revenues by 23% and EBITDA by 20% in local currency. Zhaopin continues to take share, and grew unique hirers by 20% and average daily unique visitors by 16% in 2Q17. SEEK consideration includes special dividend of between US$19-92m: SEEK stands to receive a special dividend of between US$19.1m and US$92.2m from the transaction. This relates to a special dividend of between US$0.56 and US$2.70 per ADS, with the final amount to be announced in ~four months and dependent on the amount of funds legally available to distribute to Zhaopin s shareholders. This will see some funds returned to the core business, which should drive a (very) small positive impact on net interest expense across the Group. Timing & conditions: The transaction is expected to complete in 2HCY17 and is subject to customary conditions, including the approval of Zhaopin shareholders. SEEK noted that it intends to vote all its shares (equivalent to 74.5% voting power) in favour of the merger. Earnings and target price revision EPS changes: FY17: +0.5%, FY18: +0.3%, FY19: +0.7%, reflecting the consolidation of OES, minor adjustments to Associates and FX updates. Target price unchanged at $16.50/sh. Price catalyst 12-month price target: A$16.50 based on a Sum of Parts methodology. Catalyst: Updates on SEEK job ad volumes. Action and recommendation The 'new' news here is a small uptick in the offer price (which doesn t impact SEEK given its shareholding will be largely unchanged), an update on the special dividend, and also some direction on timing (completion expected in 2HCY17). We remain positive on the outlook for Zhaopin and the broader Group. Retain Outperform. Please refer to page 4 for important disclosures and analyst certification, or on our website www.macquarie.com/research/disclosures.
SEEK (SEK) $16.33 Interim 1H17 2H17E 1H18E 2H18E Full year FY16 FY17E FY18E FY19E Revenue $m 487.9 526.3 591.6 624.6 Revenue $m 950.4 1,014.2 1,216.2 1,342.2 Opex $m 304.1 327.4 286.0 472.2 Opex $m 583.4 631.5 758.1 831.2 EBITDA $m 183.8 198.8 305.6 152.4 EBITDA $m 367.0 382.6 458.0 511.0 Depreciation $m 6.7 7.6 8.1 8.6 Depreciation $m 13.7 14.3 16.7 18.4 Amort. of intangibles (ex PPA) $m 13.9 15.3 16.8 16.8 Amort. of intangibles (ex PPA) $m 26.8 29.2 33.5 35.5 Amort. of share-based compensation $m 3.7 7.3 8.5 8.5 Amort. of share-based compensation $m 18.4 11.0 17.0 17.5 D&A (ex PPA amort.) $m 24.3 30.2 33.4 33.8 D&A (ex PPA amort.) $m 58.9 54.5 67.2 71.4 EBIT $m 159.5 168.7 272.2 118.6 EBIT $m 308.1 328.1 390.8 439.6 Associates $m 3.8 0.7-3.5-3.5 Associates $m 12.2 4.5-7.0-7.0 EBIT incl. assoc $m 163.3 169.3 268.7 115.1 EBIT incl. assoc $m 320.3 332.6 383.8 432.6 Net Interest Expense $m 5.2 13.1 11.5 10.7 Net Interest Expense $m 13.0 18.3 22.1 16.1 Pre-Tax Profit $m 158.1 156.2 257.3 104.5 Pre-Tax Profit $m 307.3 314.3 361.7 416.5 Tax Expense $m 37.0 40.1 66.0 27.3 Tax Expense $m 75.0 77.1 93.2 108.0 Net Profit $m 121.1 116.0 191.3 77.2 Net Profit $m 232.3 237.2 268.5 308.5 Minority Interests $m 16.5 18.6 24.4 26.2 Minority Interests $m 44.6 35.0 50.7 59.7 Adjusted profit (ex PPA amort.) $m 104.6 97.5 166.9 50.9 Adjusted profit (ex PPA amort.) $m 187.7 202.1 217.8 248.8 Amortisation of PPA (pre tax) $m 5.3 2.2 2.0 1.1 Amortisation of PPA (pre tax) $m 12.9 7.5 3.1 0.0 NRIs (net of tax) $m -15.3 0.5 0.5 0.1 NRIs (net of tax) $m 182.3-14.7 0.6 0.0 Reported profit $m 84.1 95.9 165.3 50.0 Reported profit $m 357.1 180.0 215.3 248.8 Adjusted EPS (ex PPA amort.) cps 30.3 28.1 48.1 14.7 Adjusted EPS (ex PPA amort.) cps 54.6 58.3 62.7 71.7 Adjusted EPS grow th % 10.8% 3.1% 58.8% (47.7%) Adjusted EPS grow th % (5.9%) 6.9% 7.5% 14.2% Reported EPS cps 24.3 27.6 47.6 14.4 Reported EPS cps 103.9 51.9 62.0 71.7 Reported EPS grow th % (69.6%) 16.0% 95.8% (47.8%) Reported EPS grow th % 26.3% (50.0%) 19.4% 15.5% DPS cps 23.0 19.7 33.6 10.3 DPS cps 40.0 42.7 43.9 50.2 Dividend yield % 1.4% 1.2% 2.1% 0.6% Dividend yield % 2.4% 2.6% 2.7% 3.1% Payout ratio (adj) % 76.0% 70.0% 70.0% 70.0% Payout ratio (adj) % 73.3% 73.1% 70.0% 70.0% FCF/sh cps 10.1 27.6 66.7 13.8 FCF/sh cps 81.4 37.8 80.4 98.7 FCFE yield (annualised) % 1.2% 3.4% 8.2% 1.7% FCFE yield (annualised) % 5.0% 2.3% 4.9% 6.0% EBITDA margin % 37.7% 37.8% 51.7% 24.4% EBITDA margin % 38.6% 37.7% 37.7% 38.1% EBIT margin % 32.7% 32.0% 46.0% 19.0% EBIT margin % 32.4% 32.4% 32.1% 32.7% EBITDA grow th % (4.9%) 14.5% 66.3% (23.3%) EBITDA grow th % 5.2% 4.3% 19.7% 11.6% EBIT grow th % (2.9%) 17.3% 70.7% (29.7%) EBIT grow th % 1.5% 6.5% 19.1% 12.5% Profit and Loss Ratios FY16 FY17E FY18E FY19E Cashflow Analysis FY16 FY17E FY18E FY19E Revenue grow th % 10.7% 6.7% 19.9% 10.4% EBITDA $m 367.0 382.6 458.0 511.0 % of EBITDA in 1H % 52.7% 48.0% 66.7% 65.8% Ch in Working Capital $m (49.4) 23.5 0.7 0.5 Effective Tax Rate % 26.6% 25.5% 25.5% 25.5% Net Interest Paid $m 15.2 18.3 22.1 16.1 PER (adj) x 29.9 28.0 26.0 22.8 Tax Paid $m 51.0 160.0 106.0 101.8 EV/EBIT x 10.4 19.4 15.6 13.4 Other $m (15.3) - - - EV/EBITDA x 16.2 15.8 13.0 11.3 Operating Cashflow $m 334.9 180.8 329.2 392.6 EV/Sales x 6.3 6.0 4.9 4.3 Acquisitions $m 39.0 118.5 - - Capex $m 54.9 50.0 50.0 50.0 Balance Sheet Ratios FY16 FY17E FY18E FY19E Asset Sales $m 331.6 - - - Other $m 29.5 29.7 - - ROE % 10.4% 10.9% 11.4% 12.3% Investing Cashflow $m 267.2 (138.8) (50.0) (50.0) ROFE % 13.8% 14.3% 17.4% 20.0% Dividends Paid $m 140.1 145.6 185.0 166.0 ROA % 6.7% 7.2% 7.7% 8.8% Equity movements $m 14.6 - - - Net Debt $m 317.8 379.1 284.9 108.3 Debt movements $m (184.7) 163.6 (34.1) (116.7) Net Debt/Equity x 0.2 0.2 0.1 0.1 Other $m (215.7) - - - Net Debt/EBITDA x 0.9 1.0 0.6 0.2 Financing Cashflow $m (525.9) 18.0 (219.2) (282.6) Interest Cover (EBIT) x 44.0 17.0 17.2 26.9 EFPOWA m 344.0 346.5 347.1 347.1 Net Cashflow $m 76.2 60.0 60.0 60.0 Divisional EBITDA estimates FY16 FY17E FY18E FY19E Balance Sheet FY16 FY17E FY18E FY19E Classifieds (Australia) $m 175.5 196.8 213.9 236.0 Cash $m 504.9 618.5 678.5 738.5 Classifieds (Zhaopin) $m 79.7 86.2 102.5 121.7 Receivables $m 98.5 128.3 152.3 169.4 Classifieds ( Asia) $m 75.8 76.6 84.2 92.6 Inventories $m - - - - Learning $m -1.9-1.0 0.0 0.0 Investments $m 81.0 114.0 107.0 100.0 Brasil Online $m 34.0 32.6 34.0 34.4 PP&E $m 28.1 35.3 68.6 100.1 OCC Mexico $m 9.3 6.6 7.1 7.8 Intangibles $m 2,388.3 2,371.7 2,318.1 2,265.1 International other $m -5.4-4.2-4.2-4.2 Other Assets $m 177.6 171.2 171.2 171.2 Total EBITDA $m 367.0 393.5 437.5 488.4 Total Assets $m 3,278.4 3,438.9 3,495.6 3,544.3 Payables $m 118.3 124.7 148.0 164.5 Short Term Debt $m 71.1 48.6 48.6 48.6 Long Term Debt $m 751.6 949.0 914.8 798.2 Snapshot Current Provisions $m 56.2 58.6 58.6 58.6 Current price $ 16.33 Other Liabilities $m 456.6 390.3 377.5 383.7 EFPOWA # 346 Total Liabilities $m 1,453.8 1,571.2 1,547.5 1,453.6 Market cap $m 5,647 Shareholders Funds $m 1,355.2 1,362.4 1,392.7 1,475.5 Net debt $m 364 Minority Interests $m 469.4 505.4 555.5 615.2 EV $m 6,011 Shaereholder Equity $m 1,824.6 1,867.8 1,948.2 2,090.7 Source: Compny data, Macquarie Research, April 2017 7 April 2017 2
Macquarie Quant View The quant model currently holds a marginally positive view on. The strongest style exposure is Quality, indicating this stock is likely to have a superior and more stable underlying earnings stream. The weakest style exposure is Price Momentum, indicating this stock has had weak medium to long term returns which often persist into the future. 150/358 Global rank in Comm. & Prof. Services % of BUY recommendations 31% (4/13) Number of Price Target downgrades 0 Number of Price Target upgrades 1 Fundamentals Attractive Quant Local market rank Global sector rank Displays where the company s ranked based on the fundamental consensus Price Target and Macquarie s Quantitative Alpha model. Two rankings: Local market (Australia & NZ) and Global sector (Comm. & Prof. Services) Macquarie Alpha Model ranking A list of comparable companies and their Macquarie Alpha model score (higher is better). Factors driving the Alpha Model For the comparable firms this chart shows the key underlying styles and their contribution to the current overall Alpha score. 1.2 0.4 0.1-3.0-2.0-1.0 0.0 1.0 2.0 3.0-100% -80% -60% -40% -20% 0% 20% 40% 60% 80% 100% Valuations Growth Profitability Earnings Momentum Price Momentum Quality Macquarie Earnings Sentiment Indicator The Macquarie Sentiment Indicator is an enhanced earnings revisions signal that favours analysts who have more timely and higher conviction revisions. Current score shown below. Drivers of Stock Return Breakdown of 1 year total return (local currency) into returns from dividends, changes in forward earnings estimates and the resulting change in earnings multiple. -0.1 0.3-0.3-3.0-2.0-1.0 0.0 1.0 2.0 3.0-30% -20% -10% 0% 10% 20% 30% Dividend Return Multiple Return Earnings Outlook 1Yr Total Return What drove this Company in the last 5 years Which factor score has had the greatest correlation with the company s returns over the last 5 years. Price to Book NTM Price to Sales FY1 Price to Sales NTM Price to Book FY1 3M Price Target Revisions Change in Cash FY0 SAL Growth 5yr Historic DPS Revisions 3 Month -32% Negatives Positives -23% -24% -24% 34% 32% 31% 31% -40% -20% 0% 20% 40% How it looks on the Alpha model A more granular view of the underlying style scores that drive the alpha (higher is better) and the percentile rank relative to the sector and market. Alpha Model Score Valuation Growth Profitability Earnings Momentum Price Momentum Quality Capital & Funding Liquidity Risk Technicals & Trading Normalized Score 0.39-0.24-0.06 0.30-0.33-0.33 0.33 0.35-0.84 0.09-0.32 Percentile relative to sector(/358) Percentile relative to market(/420) 0 50 100 0 50 100 0 0 1 1 Source (all charts): FactSet, Thomson Reuters, and Macquarie Research. For more details on the Macquarie Alpha model or for more customised analysis and screens, please contact the Macquarie Global Quantitative/Custom Products Group (cpg@macquarie.com) 7 April 2017 3
Important disclosures: Recommendation definitions Macquarie - Australia/New Zealand Outperform return >3% in excess of benchmark return Neutral return within 3% of benchmark return Underperform return >3% below benchmark return Benchmark return is determined by long term nominal GDP growth plus 12 month forward market dividend yield Macquarie Asia/Europe Outperform expected return >+10% Neutral expected return from -10% to +10% Underperform expected return <-10% Macquarie South Africa Outperform expected return >+10% Neutral expected return from -10% to +10% Underperform expected return <-10% Macquarie - Canada Outperform return >5% in excess of benchmark return Neutral return within 5% of benchmark return Underperform return >5% below benchmark return Macquarie - USA Outperform (Buy) return >5% in excess of Russell 3000 index return Neutral (Hold) return within 5% of Russell 3000 index return Underperform (Sell) return >5% below Russell 3000 index return Volatility index definition* This is calculated from the volatility of historical price movements. Very high highest risk Stock should be expected to move up or down 60 100% in a year investors should be aware this stock is highly speculative. High stock should be expected to move up or down at least 40 60% in a year investors should be aware this stock could be speculative. Medium stock should be expected to move up or down at least 30 40% in a year. Low medium stock should be expected to move up or down at least 25 30% in a year. Low stock should be expected to move up or down at least 15 25% in a year. * Applicable to Asia/Australian/NZ/Canada stocks only Recommendations 12 months Note: Quant recommendations may differ from Fundamental Analyst recommendations Financial definitions All "Adjusted" data items have had the following adjustments made: Added back: goodwill amortisation, provision for catastrophe reserves, IFRS derivatives & hedging, IFRS impairments & IFRS interest expense Excluded: non recurring items, asset revals, property revals, appraisal value uplift, preference dividends & minority interests EPS = adjusted net profit / efpowa* ROA = adjusted ebit / average total assets ROA Banks/Insurance = adjusted net profit /average total assets ROE = adjusted net profit / average shareholders funds Gross cashflow = adjusted net profit + depreciation *equivalent fully paid ordinary weighted average number of shares All Reported numbers for Australian/NZ listed stocks are modelled under IFRS (International Financial Reporting Standards). Recommendation proportions For quarter ending 31 December 2016 AU/NZ Asia RSA USA CA EUR Outperform 57.53% 50.72% 45.57% 42.28% 60.58% 52.79% (for global coverage by Macquarie, 8.71% of stocks followed are investment banking clients) Neutral 33.90% 33.97% 43.04% 50.11% 37.23% 35.62% (for global coverage by Macquarie, 8.05% of stocks followed are investment banking clients) Underperform 8.56% 15.30% 11.39% 7.61% 2.19% 11.59% (for global coverage by Macquarie, 4.63% of stocks followed are investment banking clients) SEK AU vs ASX 100, & rec history (all figures in AUD currency unless noted) Note: Recommendation timeline if not a continuous line, then there was no Macquarie coverage at the time or there was an embargo period. Source: FactSet, Macquarie Research, April 2017 12-month target price methodology SEK AU: A$16.50 based on a Sum of Parts methodology Company-specific disclosures: SEK AU: Macquarie and its affiliates collectively and beneficially own or control 1% or more of any class of Limited's equity securities. Important disclosure information regarding the subject companies covered in this report is available at www.macquarie.com/research/disclosures. Date Stock Code (BBG code) Recommendation Target Price 22-Feb-2017 SEK AU Outperform A$16.50 24-Nov-2016 SEK AU Outperform A$16.05 23-Aug-2016 SEK AU Outperform A$16.40 21-Jul-2016 SEK AU Outperform A$16.30 23-Jun-2016 SEK AU Outperform A$16.85 31-Mar-2016 SEK AU Outperform A$17.45 09-Mar-2016 SEK AU Outperform A$17.45 26-Feb-2016 SEK AU Outperform A$16.10 16-Feb-2016 SEK AU Outperform A$14.45 16-Dec-2015 SEK AU Outperform A$14.70 16-Sep-2015 SEK AU Outperform A$15.10 20-Aug-2015 SEK AU Outperform A$14.65 14-Jul-2015 SEK AU Outperform A$16.80 23-Jun-2015 SEK AU Outperform A$16.75 18-Mar-2015 SEK AU Outperform A$18.70 18-Feb-2015 SEK AU Outperform A$18.10 18-Dec-2014 SEK AU Outperform A$17.35 23-Oct-2014 SEK AU Outperform A$17.20 21-Aug-2014 SEK AU Outperform A$17.10 7 April 2017 4
This publication was disseminated on 07 April 2017 at 12:23 UTC. Macquarie Wealth Management 11-Jul-2014 SEK AU Outperform A$17.20 Target price risk disclosures: SEK AU: Any inability to compete successfully in their markets may harm the business. This could be a result of many factors which may include geographic mix and introduction of improved products or service offerings by competitors. The results of operations may be materially affected by global economic conditions generally, including conditions in financial markets. The company is exposed to market risks, such as changes in interest rates, foreign exchange rates and input prices. From time to time, the company will enter into transactions, including transactions in derivative instruments, to manage certain of these exposures. Analyst certification: We hereby certify that all of the views expressed in this report accurately reflect our personal views about the subject company or companies and its or their securities. We also certify that no part of our compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report. The Analysts responsible for preparing this report receive compensation from Macquarie that is based upon various factors including Macquarie Group Limited (MGL) total revenues, a portion of which are generated by Macquarie Group s Investment Banking activities. General disclosure: This research has been issued by Macquarie Securities (Australia) Limited ABN 58 002 832 126, AFSL 238947, a Participant of the ASX and Chi-X Australia Pty Limited. This research is distributed in Australia by Macquarie Wealth Management, a division of Macquarie Equities Limited ABN 41 002 574 923 AFSL 237504 ("MEL"), a Participant of the ASX, and in New Zealand by Macquarie Equities New Zealand Limited ( MENZ ) an NZX Firm. Macquarie Private Wealth s services in New Zealand are provided by MENZ. Macquarie Bank Limited (ABN 46 008 583 542, AFSL No. 237502) ( MBL ) is a company incorporated in Australia and authorised under the Banking Act 1959 (Australia) to conduct banking business in Australia. None of MBL, MGL or MENZ is registered as a bank in New Zealand by the Reserve Bank of New Zealand under the Reserve Bank of New Zealand Act 1989. Apart from Macquarie Bank Limited ABN 46 008 583 542 (MBL), any MGL subsidiary noted in this research,, is not an authorised deposit-taking institution for the purposes of the Banking Act 1959 (Australia) and that subsidiary s obligations do not represent deposits or other liabilities of MBL. MBL does not guarantee or otherwise provide assurance in respect of the obligations of that subsidiary, unless noted otherwise. This research contains general advice and does not take account of your objectives, financial situation or needs. Before acting on this general advice, you should consider the appropriateness of the advice having regard to your situation. We recommend you obtain financial, legal and taxation advice before making any financial investment decision. This research has been prepared for the use of the clients of the Macquarie Group and must not be copied, either in whole or in part, or distributed to any other person. If you are not the intended recipient, you must not use or disclose this research in any way. If you received it in error, please tell us immediately by return e-mail and delete the document. We do not guarantee the integrity of any e-mails or attached files and are not responsible for any changes made to them by any other person. Nothing in this research shall be construed as a solicitation to buy or sell any security or product, or to engage in or refrain from engaging in any transaction. This research is based on information obtained from sources believed to be reliable, but the Macquarie Group does not make any representation or warranty that it is accurate, complete or up to date. We accept no obligation to correct or update the information or opinions in it. Opinions expressed are subject to change without notice. The Macquarie Group accepts no liability whatsoever for any direct, indirect, consequential or other loss arising from any use of this research and/or further communication in relation to this research. The Macquarie Group produces a variety of research products, recommendations contained in one type of research product may differ from recommendations contained in other types of research. The Macquarie Group has established and implemented a conflicts policy at group level, which may be revised and updated from time to time, pursuant to regulatory requirements; which sets out how we must seek to identify and manage all material conflicts of interest. The Macquarie Group, its officers and employees may have conflicting roles in the financial products referred to in this research and, as such, may effect transactions which are not consistent with the recommendations (if any) in this research. The Macquarie Group may receive fees, brokerage or commissions for acting in those capacities and the reader should assume that this is the case. The Macquarie Group s employees or officers may provide oral or written opinions to its clients which are contrary to the opinions expressed in this research. Important disclosure information regarding the subject companies covered in this report is available at www.macquarie.com/disclosures Macquarie Group 7 April 2017 5