Tuesday, February 14, 2012

Why Jobstreet is a good buy

Not many stocks have the following traits - good growth prospects, strong net operating cashflow and gives good dividend. Jobstreet is one of the few. Let's take a look at the 5 year performance below:

On the group performance highlight alone, you can see consistent growth for the past 5 years. For the next 5 years, I do not think they will achieve the same growth profile as what they achieved in the last 5 years but I still believe that Jobstreet is going to register growth that consistently exceeds any average company.

Although there are no data provided on the market share that Jobstreet has in the online job posting market in Malaysia and Singapore, I however believe Jobstreet is the leader in the online job market in both countries. As the internet penetration increases, there will be less and less companies doing job advertisements on the newsprint due to two reasons, circulation drop and costs. It is obvious that costs for doing job ads on newspapers is much higher than doing it online. Doing it on the newsprint, there is the printing, distribution and paper costs while online the only cost is manpower which a newspaper may in fact face a potentially higher costs than online job advertising business. On circulation, with internet and especially recently tablet becoming part of the gadget that an average person would carry, I am assuming newsprint circulation will continue to drop. That is happening in all parts of the world, Asia included.

Would there be any new competitors?

As barrier of entry is low, Jobstreet is bound to have lots of potential competition from current as well as new entrants. Among them are Jobsdb, Monster, JobsandMore etc. however the key indicator for this is subscribers. Jobstreet has the most subscribers in the business in the main countries that they operate in. Monster and Jobsdb could potentially be bigger in the countries that they dominate themselves but Jobstreet wins in Malaysia and maybe Singapore. Jobstreet owns an equity accounting stake (of more than 20%) in 104 Corporation, an online job site company which is leading in Taiwan.

On the competition from traditional online job posting, I am not too worried but the more worrying part is technology. In US, there are already some data that shows LinkedIn may have taken some share from Monster.com but even then US is facing a severe unemployment problem.


One of the strength of Jobstreet is cashflow. There are not much new investments to be made and if any, its profitability would have easily overcome the investments. Its cashflow is in fact so strong that it has committed to paying 50% dividend from its profit after tax. Its dividend over the last 3 years are as follows:

From the above, the dividend yield is around 3.3% which is very attractive.


Jobstreet's price has dropped from its high of RM2.78 in between March and May 2011 to around RM2.15 recently. The drop I believe is partly to do with disposal by one of its larger institutional shareholders, FMR LLC and FIL Limited. I am not too worried over the disposal as I believe this is part of the process where institutional investors are locking in profits. This could be also due to movement of portfolio by these funds as US and Europe seem to be more attractive than Malaysia or Asia rather recently. FMR sold around 3.5 million stocks over the last 6 months and from this sale, it allows Jobstreet to become attractive.

At RM2.15, it is trading at 14x PE. Consider this - for a company that still has good growth and dividend, the 14x PE is good price.

Take a look at its last 4 quarters result:

Serious Investing!

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