Huge Potential in JobStreet.com

In last Saturday's Bizweek, JobStreet.com had a full page exposure on Page 3.

The link is quoted from The Star here

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ONLINE recruiter Jobstreet Corp Bhd made a net profit of RM29mil in 2007. On its own, the number, apart from signalling that the company is rather profitable, doesn’t say anything more. But listen to what Jobstreet chief financial officer Greg C. Poarch has to say: “When we first got listed (in 2004), people wondered whether we could make net profits of RM4mil. We said we would try!”.

The company has evidently been recording impressive growth beyond expectations. From a modest revenue of RM12.5mil in 2002, the company achieved revenue of RM82.4mil in 2007.

A bulk or 65% of earnings last year stemmed from Malaysia with the remainder from its overseas markets.

In the first quarter to March 31, Jobstreet’s net profit jumped 75% to RM10.5mil, while turnover jumped 41% to RM25mil.

The company’s net profit margin widened to 41.5% from 33.3% in the previous quarter and it is sitting on a cash pile of RM59.6mil, which translates into cash per share of 20 sen.

“In our business, we don’t have any capital expenditure. The only cost is our electricity bill!” says Jobstreet.com chief executive officer Mark Chang.

As it stands, Jobstreet has approximately 60,000 advertising clients and 5 million jobseekers in nine countries. Everyday, it receives an average of 5,000 to 6,000 new jobseekers into its database.

It is the number one player in Malaysia with a 73% market share. It is also the number one player in the Philippines and is neck to neck with JobsDB, the market leader in Singapore.

With all the cash flexibility that it has, what does Jobstreet plan to do?

This year itself, Jobstreet has been acquiring stakes in companies to further strengthen its position in the region.

“If you ask me, I will buy up other job sites in this world, because I know that growth in our industry can only go up. I believe the online advertising market will mature in the next 20 to 30 years.

“This is the Asian century, and growth here will outperform other continents. This means that talent and jobs will increase in Asia. Internet penetration can also only increase,” says Chang.

Chang adds that the online recruiting industry is recession proof, and this is evident from the fact that Jobstreet has always got a boost in its earnings during bad times, for instance during the 1997 financial crisis and the 2001 tech bust.

“During those bad times, people began to consider using online advertising, as it was so much cheaper. Over the Internet, you only pay RM600 to RM800, while for the newspapers, perhaps you pay RM20,000 for an advertisement,” he says.

Chang says the benefits of having online advertising are aplenty as the employer is able to make changes to his advertisement and keep track of the number of people applying.

For the jobseeker, he is able to keep tabs on the status of his job matching. Some of the value features include Jobstreet providing SMS reminders to the jobseekers for his interview appointment, and a confirmation SMS to the employer that the jobseeker is attending the interview.

Says Poarch: “Jobstreet is not dependent on any one country. In good and in bad times we do well.”

A Simple Idea

Jobstreet’s business model is simple: It makes money from employers wanting to put out job advertisements. Period. It doesn’t make extra incentives from job matches or extra number of resumes posted in its database.

Hence, from a mere 1.3 million jobseekers in its database back in 2002, it has the resumes of 5 million jobseekers in nine countries today. Over that same period, Jobstreet’s job employers has grown from 11,000 to 50,000.

In Malaysia, there are 4 million to 5 million people in the work force, and Jobstreet has 1.2 million of those resumes in its database. Generally, online recruitment companies are enjoying strong revenue growth as employers shift their recruitment advertising from print to online.

Another plus point of online recruitment is that advertisers can obtain faster responses more systematically.

In markets where JobStreet is dominant (Malaysia, Singapore and the Philippines), it is able to dictate market rates, hence grow margins.

Chang adds that the information technology sector is extremely fast moving, where technology changes by the minute.

“We are now paying a lot of attention to building a strong infrastructure, and that means a system which is very updated. Once the infrastructure is in place, it is easy to enter a new market,” says Poarch.

Poarch adds that Jobstreet spends RM4mil to RM5mil on research and development yearly.

“Coming up with an idea is relatively easy. Lots of people think starting a website is awfully easy, and cheap.

“But to give it the right features, make it interactive and provide convenience to the user, you need to invest in the technology and products. To make jobseekers happy, you need to provide a beautiful infrastructure,” he says.

Presently, Jobstreet’s customers are mostly multinationals and large local companies. Statistics show that 90% of the employment workforce are in the small and medium industries.

“We are now trying to reach out to the SMEs, and as they are very different from the big companies, the pricing has to be different. It’s got to be simple and easy, and the mode of payment has to be convenient. For instance, they can pay with their credit cards,” says Chang.

For this year, Jobstreet will continue to strengthen its position in its existing overseas markets.

The JobStreet.com brand is now in Malaysia, Singapore, the Philippines, India, Bangladesh, Indonesia, Japan and Thailand.

It also has synergistic investments in companies in Hong Kong and Taiwan.

Overseas strategy

Jobstreet recently entered its ninth market in Thailand, partnering the country’s number one portal, Sanook, via a 49:51 joint venture (JV), which it will invest RM1.6mil initially.

It is awaiting the permit that will allow the JV to be majority owned by a foreign company and will submit application so that Jobstreet can ultimately hold 60% in the JV.

Sanook sees an average of 4.5 million hits per month and has signed a commercial agreement with eBay for an e-commerce site on a revenue sharing basis.

“In Thailand, Sanook is the leading portal. It has more hits than Yahoo,” says Poarch.

“With a strong brand in Thailand, the advertisement spending on Jobstreet’s part should not be as significant and we view Sanook as a strong partner,” says CIMB Research.

Meanwhile, Singapore and the Philippines are Jobstreet’s strongholds. It is No. 1 in the Philippines, and shares a duopoly with JobsDB in Singapore (who is also the market leader in Indonesia).

Jobstreet is No. 2 in Indonesia, and after three years of operations, is now starting to generate small profits.

In India, while the venture is still loss making, Jobstreet is maintaining its presence, as it believes that the market’s large population holds future potential.

Jobstreet’s presence in Japan is slightly different, as what it does is to bring foreign workforce into the country.

“We recently brought in 130 engineers from the Philippines to Japan. This is still a new concept that we’re pioneering. It will take a while before it takes off,” says Chang.

Acquisitions

Cash is king especially during bad times. With its huge cash hoard, JobStreet has been on an enviable position of being able to indulge in a buying spree.

It acquired and signed joint ventures with four web business operators in deals worth RM19.7mil.

Last year, it purchased a 4% stake in a Taiwan online recruitment outfit called 104 Corp, costing RM9.1mil.

This year, JobStreet subscribed for a 8.64% stake in Hong Kong-based recruitment media outfit Recruit Holdings Ltd, valued at RM10.9mil.

This was followed by the RM7.3mil acquisition of a 20.07% stake in newly listed Mesdaq firm Innity Corp Bhd, which is involved in online web advertising.

“Innity is the largest online advertising interactive company in Malaysia. As Jobstreet has a 20% stake in the company, we are able to equity account Innity’s profits. There is a lot of synergy between our traffic. People have yet to realise how big online advertising will be,” says Poarch.

Says Chang: “We know that our sort of business generates lots of cash. In those countries that we cannot enter because the incumbent is too strong, we invest in the incumbent. That way we get to enjoy the growth in that market as well.”



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