Monday, July 14, 2014

Is Jobstreet underpriced by Seek?

How can a footballer which is banned for four months, aged 27 years old be sold still at the 3rd highest price paid for a footballer ever? This is because he is one of the best despite the risk that Barcelona is taking with him potentially biting again - yes I am talking about Luis Suarez. It is very hard to find a player similar, barring the risk of further suspension on him if he bites again. Barcelona knows that they have to pay to get the best.

To get the best, you have to pay a high price, higher than fair. For a below average company, one should pay below average PE. For an average company, it should be priced at average PE. And for a top company, an above average price earning should be paid for. This is despite the price is at 29x PE. And this is what the Jobstreet's management did not negotiate well, despite they have some of the dream team of Malaysian best brains in its board. (And I am not saying Jobstreet bites)

For Seek to pay 29x PE and eliminate competition in many South East Asian countries, this is a dream come true. For a while, Jobstreet and Jobsdb are competing mainly as the top two in many countries - Malaysia, Singapore, Indonesia, Philippines.  As a football team, imagine you have all the best players after you have bought your competitors best. 

In fact - the football analogy may be different from business. In football, you can still buy many good players, to replace one top player, but in business you cannot just throw say RM1 billion to recreate another Jobstreet. It just does not work like this! And if you just do this, it will take many years - not immediately.

One cannot recreate a dominant company just like that and Jobstreet dominates together with Jobsdb in most of the countries they are operating in.

Note: I am bringing this up because Jobstreet is renegotiating the selling price with Seek.com as it seems that there is delay in Competitive Companies Singapore in approving the deal due to anti-competition law. And it seems that if the deal extends beyond July 1, 2014 - there is a right for Jobstreet to renegotiate or walk away from the deal. To me, the thing that Jobstreet is doing is right but it may be too eager to sell. It has to negotiate thinking that Seek is eliminating a key competitor - not based on fair value as in what most investment bankers will use i.e. comparative acquisition multiple.

14 comments:

Bn911 said...

Hi Felicity, let say the deal is fail, what you think will be the downside risk? Thanks.

felicity said...

The downside risk is jobstreet and jobsdb will compete again

hoseadavids said...

I hope the deal fails. It would be more rewarding if Jobstreet keep their core business. Revenue & profit are raising nicely. So is the dividend given to shareholders.

I think the risk is minimal.

I hope that deal fails and the price goes down substantially so that I can buy more.

phantom78 said...

Our analysis shows that the salient assets post the buyout is still approx. 40c per share. That said, I also hope the deal will not go through so that I can continue to own this debt-free, cash-laden online business that commands 50% profit margin and strong cashflow.

paperplaneinc said...

I think either way we still win. Can buy more now especially snowballs 2.40

paperplaneinc said...

I think either way we still win. Can buy more now especially snowballs 2.40

J-base said...

Hi Felice,

I know someone asked before, but I still don't feel clear about it: Is the special dividend paid back RM2.4 NET? Will that be any tax incurred on the Rm2.4 to be distributed?

(I understood for Single Tier Dividend, tax will be imposed on the proposed distribution hence what shareholders get will be less, pls correct me if im wrong)

Thanks!

felicity said...

hi J-base

No it will not be taxed. The single-tier dividend means what you get is the net amount. Until now however, it has not mentioned how much per share will be received assuming the deal is through.

The distribution should be RM1.7 billion in total.

Rgds

J-base said...

I see. thanks Felice.

Will accumulate some.. Assuming bought at around RM2.4 and the distribution is RM2.4, then it seems like the assets and entities not sold to SEEK are "free", besides the potential of a new business albeit it maybe PN17 in the interim.

paperplaneinc said...

Hi Felice, do you think buying anything below RM2.4 make good sense? As I've calculate, its building alone worth the price.

felicity said...

The Jobstreet's building is not worth that much. It is probably worth between RM13 to RM20 million. If the deal is through though, the cash portion to be distributed would be RM1.7 billion.

paperplaneinc said...

what I meant is building alone worth 0.02

Gallen said...

Jobstreet announced special dividend to be revised to approximately RM 2.62 from RM 2.40 due to higher sale consideration

Akagi Shigeru said...

Felicity :
As per yesterday announcement, do you think the deal is considered the done deal ? Do you think the SG authority would not allow the deal ? I have been floowing up this for sometimes and I do hold position on Jobstreet. It looks and sound like the proposal would be concluded soon. I am thinking to add more for I don't think the management want to keep the copany in PN17 for long. I appreciate your comment. Thanks.