Portfolio Update: Purchase of SEEK (ASX: SEK)

Portfolio Update:
Purchase of SEEK (ASX: SEK)

28th March 2025

Across the Australian Equity component of investor portfolios, we are in the process of implementing the purchase of Seek (ASX: SEK) across a number of SMA platforms.

Seek is an online employment marketplace provider in Australia, New Zealand & South East Asia. They run employment listings websites and provide recruitment management systems. They also have interests in Education, HR & Contingent Labour hire platforms through the Seek Growth Fund.

We are attracted to Seek for the following reasons:

Strong market position – #1 in ANZ and a market leader in South East Asia
Pricing power
Scalability of platform businesses
Recent simplification of the business and improved transparency

Seek has two key levers for value creation:

Leveraging pricing power
Operating leverage
Macro – volumes

Firstly, the business has demonstrated strong pricing power in recent years despite declining job placement volumes. Seek’s increasing market share throughout this period reinforces our confidence that this pricing power is genuine. We think their ability to grow price has been enabled by the AI & digital solutions they have rolled out to improve both the candidate experience & client productivity. This is an important driver of long-term revenue growth.

Secondly, under new management we have seen a commitment to leveraging the scalable cost base of a platform business and to reward shareholders with margin expansion. With a more constructive job ad outlook from FY26 supported by interest rate cuts, we see potential for strong profit growth (given operating leverage), as revenue growth returns.

We have funded the purchase of Seek via sale of Nine Entertainment (NEC.ASX). The decision was driven by two main considerations:

The likelihood of NEC rejecting the offer / Co Star abandoning the bid for Domain Group (“DHG”) and the likely ensuing sell-off;
The Co Star bid for DHG is accepted with NEC ultimately (timeframe unknown) returning cash to shareholders. With the sale of DHG, the remaining business is unlikely to rejoin the S&P ASX 100 Index, our investable universe, within any reasonable timeframe. In this scenario the policy would require us to sell the position.

We do acknowledge that other possibilities include a higher bid from Co Star for DHG or a consortium bid for NEC between Co Star and major NEC shareholder Bruce Gordon.

The downside of the bid being abandoned was seen to be greater than the upside of the other 2 scenarios.

As always, thank you for your ongoing support, it is very much appreciated. If you have any questions or would like more information, please contact your adviser.

Warnings and disclosures

This material has been prepared for general information purposes only and not as specific advice to any particular person. Any advice contained in this material is General Advice and does not take into account any person’s individual investment objectives, financial situation or needs. Before making an investment decision based on this advice you should consider whether it is appropriate to your particular circumstances, alternatively seek professional advice. Where the General Advice relates to the acquisition or possible acquisition of a financial product, you should obtain a Product Disclosure Statement (“PDS”) relating to the product and consider the PDS before making any decision about whether to acquire the product. You will find further details of the service we provide and any cost to you within the Financial Services Guide. Any references to past investment performance are not an indication of future investment returns. Prepared by EP Financial Service Pty Ltd ABN 52 130 772 495 AFSL 325 252 (“Elston”). Although every effort has been made to verify the accuracy of the information contained in this material, Elston, its officers, representatives, employees and agents disclaim all liability (except for any liability which by law cannot be excluded), for any error, inaccuracy in, or omission from the information contained in this material or any loss or damage suffered by any person directly or indirectly through relying on this information.