Stock Name: JOBST
Company Name: JOBSTREET CORPORATION BHD
Research House: HWANGDBS
JobStreet Corporation Bhd
(May 10, RM2)
Maintain buy at RM1.98 with target price of RM3.20: The number of job postings on the Malaysian portal surged to 17,000 at end-March, the highest in JobStreet's history, and compares to about 13,000 at end-February and a low of 7,000 in January 2009.
This was a surprise as 1Q is typically a quiet period. Hence, 1QFY10F earnings should show improvement year-on-year and quarter-on-quarter. There could be upside to our FY10F earnings as we assumed about 14,000 jobs per month for Malaysia. Also, DBS economist recently upgraded 2010 GDP forecast to 8% versus our current assumption of 5.7%. Historically, 1% GDP growth would increase JobStreet's revenue by 3%-5%.
JobStreet is in a win-win situation. It is operating in the right growing online industry while capitalising on strong job creation in the Asean market. The government's National Broadband Initiative is creating stronger awareness in the SME market, which JobStreet is trying to penetrate.
This could be a strong catalyst for the stock. In our view, this will create a sustainable structural shift from print to online advertising. In fact, classified sales for appointments had been declining in 2007-2009. Our sensitivity analysis indicates that every 10% migration of classified sales from The Star to JobStreet would enhance JobStreet's earnings by 3%. Furthermore, the growing adoption of gadgets such as the iPhone and iPad will boost accessibility to JobStreet's services.
The swift improvement in the job market supports our view that JobStreet is one of the best proxy to economic recovery in the Asean markets. With SEEK raising its stake to 22.4% now, we can expect more tangible synergies such as marketing ideas, new user interfaces, analytics and also new markets. Meanwhile, major shareholders SEEK Ltd and Fidelity remain firm with their investments in JobStreet, with Fidelity raising its stake from 11.5% to 11.7% on April 10.
Given JobStreet's strong cash flow generation ability, it is well-positioned to reap further acquisition and investment opportunities. We estimate it will generate RM23 million-RM41 million free cash flow (FCF) over FY10-FY12F, while its balance sheet is in net cash position of RM50 million (16 sen per share).
However, as JobStreet has met its target of 20% stake in 104 Corp this year, it is unlikely to raise its stake further for now. Hence, with the excess cash in hand, we do not discount the possibility of a higher dividend payout (currently 35%, implies 1.5% net yield).
We are retaining our buy rating, and RM3.20 price target based on one time price earnings-to-growth (PEG) (FY09-FY12 net profit compound annual growth rate of 25%). This implies 19.9 times fully diluted FY12F PE. - HwangDBS Vickers Research, May 10
This article appeared in The Edge Financial Daily, May 11, 2010.
Company Name: JOBSTREET CORPORATION BHD
Research House: HWANGDBS
JobStreet Corporation Bhd
(May 10, RM2)
Maintain buy at RM1.98 with target price of RM3.20: The number of job postings on the Malaysian portal surged to 17,000 at end-March, the highest in JobStreet's history, and compares to about 13,000 at end-February and a low of 7,000 in January 2009.
This was a surprise as 1Q is typically a quiet period. Hence, 1QFY10F earnings should show improvement year-on-year and quarter-on-quarter. There could be upside to our FY10F earnings as we assumed about 14,000 jobs per month for Malaysia. Also, DBS economist recently upgraded 2010 GDP forecast to 8% versus our current assumption of 5.7%. Historically, 1% GDP growth would increase JobStreet's revenue by 3%-5%.
JobStreet is in a win-win situation. It is operating in the right growing online industry while capitalising on strong job creation in the Asean market. The government's National Broadband Initiative is creating stronger awareness in the SME market, which JobStreet is trying to penetrate.
This could be a strong catalyst for the stock. In our view, this will create a sustainable structural shift from print to online advertising. In fact, classified sales for appointments had been declining in 2007-2009. Our sensitivity analysis indicates that every 10% migration of classified sales from The Star to JobStreet would enhance JobStreet's earnings by 3%. Furthermore, the growing adoption of gadgets such as the iPhone and iPad will boost accessibility to JobStreet's services.
The swift improvement in the job market supports our view that JobStreet is one of the best proxy to economic recovery in the Asean markets. With SEEK raising its stake to 22.4% now, we can expect more tangible synergies such as marketing ideas, new user interfaces, analytics and also new markets. Meanwhile, major shareholders SEEK Ltd and Fidelity remain firm with their investments in JobStreet, with Fidelity raising its stake from 11.5% to 11.7% on April 10.
Given JobStreet's strong cash flow generation ability, it is well-positioned to reap further acquisition and investment opportunities. We estimate it will generate RM23 million-RM41 million free cash flow (FCF) over FY10-FY12F, while its balance sheet is in net cash position of RM50 million (16 sen per share).
However, as JobStreet has met its target of 20% stake in 104 Corp this year, it is unlikely to raise its stake further for now. Hence, with the excess cash in hand, we do not discount the possibility of a higher dividend payout (currently 35%, implies 1.5% net yield).
We are retaining our buy rating, and RM3.20 price target based on one time price earnings-to-growth (PEG) (FY09-FY12 net profit compound annual growth rate of 25%). This implies 19.9 times fully diluted FY12F PE. - HwangDBS Vickers Research, May 10
This article appeared in The Edge Financial Daily, May 11, 2010.
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