Lastly, we turned our attention to the digital recruitment business SEK as we considered whether this underperformer amongst its peers could catch a bid after delivering lower-than-expected guidance for FY24 in August, i.e. they guided to underlying cost growth of 4-11% in FY24, which took the market by surprise, higher costs impact margins which then impact earnings, hence we saw universal downgrades as a result. Like many local companies, SEK has struggled with costs, and while we believe this is a quality business, it’s not cheap trading on a 34.7x valuation for 2024, especially compared to the likes of CAR. The market agrees with CAR, up 43% year-to-date compared to SEK, which is closer to 9%, as we’ve touched on a few times recently, it still feels too early to fade such relative performance, especially as unlike the car market, which is tipped the stay strong, the employment market is set to get tougher. NB: SEK was upgraded this morning to buy equivalent from JP Morgan with a $27 price target.
- We aren’t planning to fight SEK’s underperformance trend at this stance, preferring other tech-facing names.
MM is neutral toward SEK
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