Sunday, October 19, 2008

CIMB raised Target Price from 2.31 to 2.38

CIMB raised target price of from 2.31 to 2.38. This is done on 17th October 2008, despite the great uncertainty in the market. When lots of stock prices crashed,'s stock price was not affected much. It dropped by just a few % over the past couple of months, when the index dropped quite heavily.

Quoting it from a CIMB Report.

Jobstreet’s presentation at the Investor Expo drew an audience of 13. Speaking on
behalf of the company, CFO Mr. Greg Poarch gave a comprehensive overview of the
company, its structure, business model, outlook and the recent spate of corporate

Focused on building the brand in SE Asia. The company is well on its way to being
the top online recruitment site in Southeast Asia and has now shifted gears to
penetrate countries that are less mature and where Internet penetration is fairly low.

Opportunities are still plentiful given SE Asia’s fairly large population, its developing economies which present more job opportunities and the ongoing print to online migration.

Recession providing an opportunity as well as a threat. As weaker players are
flushed out by the recessionary environment or are gobbled up by larger players,
Jobstreet should be well positioned to benefit from this trend. In many of the markets it operates in, it is one of the top two operators. This bodes well for the company as the top two usually reap handsome profits in any market and competition would peter out in what is already a fairly benign environment in their core markets. That said, recession could slow down Jobstreet’s growth as businesses cut back on hiring, thus reducing the volumes of job postings. This, however, could be mitigated by the ongoing migration from print to online, which is the cheapest form of recruitment.

Seeking a stake. The entry of Seek (SEK AU, NR), the dominant Australian online
recruitment firm, as a 10% shareholder is positive as it validates Jobstreet’s branding and success in executing its business model. To recap, Seek purchased a 10% stake at an average cost of RM1.78/share or a total cost of RM55.1m. We gather that the investment will be more of a passive one where Seek will provide input and insights and will not be seeking board representation. Synergies could be derived from a partnership where new products/services could be offered, new market segments
could be penetrated or even some form of infrastructure sharing could occur.

Non-renewal of pioneer status? Jobstreet is actively working on securing the
renewal of its pioneer status which expires in May 09. While early indications appear
to be positive given the expanding and growing profile of the group, the investments in R&D and the fairly tech heavy business it is involved in, there is no guarantee of the renewal, especially given the uncertain political climate. We leave our forecasts untouched pending more visibility into this issue.

Upping its stake in 104 Corp. Jobstreet has accumulated a 5.2% stake in 104 Corp
(3130 TT, NR), the leading Taiwanese online job portal, at a cost of RM20.6m. It was
reluctant to shed any more light on its strategy there although we cannot rule out
further accumulation. Any subsequent purchases, however, would need the consent
of shareholders as this investment now accounts for 25% of its net assets. At this
point in time, there is little clarity on whether Jobstreet will incur any mark-to-market losses from its investment given the falling share price of 104 Corp.


No surprises. There were no surprises revealed during the briefing. We continue to
like Jobstreet for its success in building up an impressive local and regional franchise, and for the increasing operating leverage that is taking root. While the outlook does cause some consternation, we believe that Jobstreet should be able to ride out the storm.

Valuation and recommendation

Maintain earnings forecasts and OUTPERFORM call. The information revealed
during the Investor Expo came as no surprise and does not alter our positive stance
on the company. Even in trying circumstances, Jobstreet continues to execute well
and defy the tougher operating environment. The regional operations provide a buffer
to the local anchor. We now roll over our target price but downgrade our multiple from 15x to 12.7x as we switch our valuation methodology from peer comparison to
benchmarking it to our target market P/E. We attach a 10% premium to our target
market P/E on account of Jobstreet’s superior ROEs and strong 3-year EPS CAGR.
Hence, our target price rises from RM2.31 to RM2.38. The re-rating catalysts include
a) continued growth in core markets, b) diversification into new ones and c) operating leverage gaining traction.

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