Yesterday saw SEK tumble up to -9.9% early in the session before recovering half of the losses – lower-than-expected guidance for FY24 was the key reason for the decline. SEK delivered an adjusted net profit of $255mn for FY23, a whisker above consensus while the board declared an increase in the dividend to 23c. Revenue rose by 10% to $1.225mn, just missing previously downgraded guidance of $1.245mn as job ads struggled with the deteriorating macro environment. The more downbeat expectations for FY24 (~7% below consensus at the EBITDA line) were accompanied by cautious rhetoric, showcasing the influence of economic activity on their earnings.
That said, this is a quality business that continues to operate well despite the external challenges, the company’s platform unification program has progressed well with all software development for the re-cut online marketplace now completed on time, with November the targeted month for rollout. Analysts largely like the stock with 8 buys, 3 holds and 2 sells, we are in agreement with them from a business perspective but the main variable is the economy into 2024. The key softness in yesterday’s numbers was around FY24 guidance which we believe is prudent on their part as economic activity is outside of their control – potentially under-promising and over-delivering if the Goldilocks scenario does unfold in the global economy.
- When we weigh up the risk/reward around $24.70 our concern is that although we like the business we wouldn’t be buying/adding here hence should we sell?
- To increase our 3% position we would want SEK under $22 whereas at current levels we are likely to hold but our position could be used to fund better alternatives if they arise.
MM is not planning to increase our 3% position in SEK
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