1. I.T companies are usually high risk so demand for debt issues would be pretty low. These sort of companies are usually funded by equity rather than debt
2. The price (5-5.5%+Swap rate) is pretty generous for debt. You are looking at potential yields of 9% or so (which is more that equity at the moment)
So I decided to put my financial analyst hat on and go looking into the Annual report of SEEK for 2011. A few things found
1. Not a big fan of how SEEK put "Share of profits of associates and jointly controlled entities accounted for using the equity method" straight into the front part of the Consolidated income statement. Under IFRS, I thought that this should go into the "Other Comprehensive Income" section. I believe this addition over inflates the Net Profit after tax figure. If you adjust it, you have Common size NPAT dropping by 7% over the year 2011.
2. Debt to Equity is already slightly high at 0.63. Current Ratio is low at 0.68
3. Financial Leverage is over 2.2
4. Book Value per share (if you remove intangibles) is negative.
5. The sale of Put option to buy another 20% of JobsDB (capped at around AUD 83,000,000 in 2023/2014) not great. Hmmmmmmmm. Not sure myself. But I would suggest a fair bit of due diligence/financial advice before deciding to invest.
Disclaimer: This is a personal opinion based on certain assumptions/calculations that may or may not be true/correct. It is not financial advice and should not be taken as a recommendation to invest/not invest in the SEEK notes issue
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