KUALA LUMPUR: In an economic slowdown the last thing one thinks of is changing jobs or increasing headcount. And that could be a worry for online recruitment firm JobStreet Corp Bhd.
As prospects of a global economic slowdown in 2012 loom large, JobStreet is facing concerns that its earnings could be impacted from weaker business sentiment and a soft job market.
In recent months, concerns over lower recruitment advertisements have pushed JobStreet’s share price down by some 20% to a six-month low of RM2.30 on Oct 7, from the previous levels of RM2.80 to RM2.90. The stock has since rebounded slightly to end last week at RM2.50.
JobStreet chief financial officer Greg Poarch acknowledges that the global sentiment has turned more negative since August.
Though there is an increasing likelihood of a worldwide economic slowdown next year, Poarch pointed out that many economists are still predicting reasonable economic growth for Malaysia in 2012.
Indeed, even as some economists doubt the government’s GDP growth projection of 5% to 6% for 2012, there is consensus that Malaysia could still record GDP growth of under 5%.
In an email interview with The Edge Financial Daily, Poarch said JobStreet is still confident that it will continue to do “relatively well” in 2012 as companies continue to compete for talent.
“Ultimately, Malaysia’s biggest problem is that the job market lacks talent. We believe it is still a priority issue for many companies rather than short-term dips in the global economy.
“Companies are still struggling to hire people and we believe many companies will start to look at down periods as a good opportunity to hire quality talent before the competition does,” Poarch said in the interview.
JobStreet’s online advertising site, JobStreet.com, has over 1.9 million registered jobseekers in Malaysia alone.
Malaysia is JobStreet’s main geographical segment, contributing over 60% of the group’s earnings and turnover. It also has presence in Singapore, the Philippines, Indonesia and is in the process of developing a presence in Thailand, India and Japan.
Earlier, JobStreet said demand for recruitment advertising services remained solid in 2H11, though it did not rule out a possible slowdown due to global economic uncertainty.
“JobStreet will focus on sustaining and increasing long-term shareholder value although profitability may be negatively impacted in the short term,” the group cautioned in the notes to its latest financial results.
JobStreet’s performance for FY11 ending Dec 31 will still depend on sustained economic growth, a competitive environment and the group’s ability to grow sales and investment performance, the group said.
For 2QFY11 ended June 30, JobStreet’s net profit rose 20.14% to RM13.35 million from RM11.11 million a year ago driven by higher sales from higher recruitment activities.
Pre-tax profit grew 12.51% to RM17.7 million from RM15.73 million a year ago on the back of 21.8% revenue growth to RM36.22 million from RM29.74 million a year ago.
During the quarter, JobStreet’s operating expenses increased by 26.4% due to higher staff costs and marketing expenses, the group said in the notes to its financial results.
Earnings per share was 4.2 sen and net assets per share was 59 sen as at June 30.
Quarter-on-quarter, JobStreet’s net profit climbed 18.26% to RM13.35 million from RM11.29 million while revenue grew 7.73% to RM36.22 million from RM33.62 million in the preceding quarter.
For the six-month period, JobStreet’s net profit grew 24.64% to RM24.64 million from RM19.8 million while revenue increased 21.76% to RM69.85 million from RM57.36 million a year ago.
Analysts said JobStreet is on track to meet net profit forecasts of between RM47 million and RM48 million in FY11, with JobStreet’s 1HFY11 profit of RM24.6 million constituting roughly half of the full year forecast.
However, analysts are less upbeat on JobStreet’s earnings prospects in FY12 and FY13, with two research houses calling “hold” on its stock and one with a “sell” call.
In a recent note, HwangDBS Vickers Research cautioned that JobStreet’s earnings in the next two years could face downside risks, and had slashed JobStreet’s forecast earnings for FY12 and FY13 by 20% to 21%.
The lower earnings projection for FY12 was based on the assumption that job advertisements could fall 14% y-o-y instead of an earlier projection of 15% growth while earnings before interest, tax and amortisation (Ebita) margin could be squeezed to 41% from 43%, HwangDBS Vickers Research said.
“Historically, JobStreet’s revenue correlated strongly with GDP with each 1% growth in GDP raising revenue by 3% to 5%.
“The current monthly average of 23,000 job advertisements for 3QFY11 may not be sustainable in 2012,” the research house said in a report dated Oct 4.
Nevertheless, JobStreet’s share price could be supported by its high net cash backing and prospective 3% net dividend yield for FY12, HwangDBS Vickers Research said.
As at June 30, 2011, the company had net cash and equivalents of RM83.06 million, which translates into 25.5 sen per share. That accounted for 43% of its net assets per share of 59 sen.
HwangDBS Vickers also pointed out that Malaysia, JobStreet’s core market, currently appears less vulnerable to external turbulence as it is supported by the government’s Economic Transformation Programme (ETP), which aims to create 3.3 million new jobs by 2020.
Still, macro-economic challenges exist, and JobStreet is also facing higher competition and lower pricing for job postings from its main regional competitor, Hong Kong-based JobsDB Inc, which operates online recruitment websites in Southeast Asia, Australia and China.
JobStreet’s single largest shareholder is Australia-based recruitment website SEEK Ltd, which held a 22.3% stake as at May 9, 2011.
SEEK’s 69%-owned subsidiary, SEEKAsia Ltd, however, also holds an 80% stake in JobsDB.
In July, SEEKAsia increased its shareholding in JobsDB to 80% from the 60% block it acquired in December last year.
Poarch said JobStreet will continue to compete with JobsDB by leveraging its competitive advantage in Southeast Asia, ensuring quality customer service and keeping costs low.
Earlier this month, HwangDBS Vickers Research downgraded JobStreet to a “hold” while revising downwards its 12-month target price to RM2.30 from RM3.60 due to moderate growth prospects.
OSK Research, meanwhile, reiterated its “sell” call on JobStreet’s stock at a revised fair value of RM2.10 based on a forward price-earnings ratio of 13 times for FY12.
According to OSK Research, JobStreet is currently trading at a FY12 PER of 18 times, which the research house said is unjustified given the gloomy global economic outlook which is likely to dampen hiring sentiment.
Poarch shrugged off the valuations attached to JobStreet’s stock, saying, “We will just focus on building a strong, sustainable business and let the market decide the valuation”.
This article appeared in The Edge Financial Daily, October 24, 2011.
As prospects of a global economic slowdown in 2012 loom large, JobStreet is facing concerns that its earnings could be impacted from weaker business sentiment and a soft job market.
In recent months, concerns over lower recruitment advertisements have pushed JobStreet’s share price down by some 20% to a six-month low of RM2.30 on Oct 7, from the previous levels of RM2.80 to RM2.90. The stock has since rebounded slightly to end last week at RM2.50.
JobStreet chief financial officer Greg Poarch acknowledges that the global sentiment has turned more negative since August.
Though there is an increasing likelihood of a worldwide economic slowdown next year, Poarch pointed out that many economists are still predicting reasonable economic growth for Malaysia in 2012.
Indeed, even as some economists doubt the government’s GDP growth projection of 5% to 6% for 2012, there is consensus that Malaysia could still record GDP growth of under 5%.
In an email interview with The Edge Financial Daily, Poarch said JobStreet is still confident that it will continue to do “relatively well” in 2012 as companies continue to compete for talent.
“Ultimately, Malaysia’s biggest problem is that the job market lacks talent. We believe it is still a priority issue for many companies rather than short-term dips in the global economy.
“Companies are still struggling to hire people and we believe many companies will start to look at down periods as a good opportunity to hire quality talent before the competition does,” Poarch said in the interview.
Poarch acknowledges that the global sentiment has turned more negative since August.
JobStreet’s online advertising site, JobStreet.com, has over 1.9 million registered jobseekers in Malaysia alone.
Malaysia is JobStreet’s main geographical segment, contributing over 60% of the group’s earnings and turnover. It also has presence in Singapore, the Philippines, Indonesia and is in the process of developing a presence in Thailand, India and Japan.
Earlier, JobStreet said demand for recruitment advertising services remained solid in 2H11, though it did not rule out a possible slowdown due to global economic uncertainty.
“JobStreet will focus on sustaining and increasing long-term shareholder value although profitability may be negatively impacted in the short term,” the group cautioned in the notes to its latest financial results.
JobStreet’s performance for FY11 ending Dec 31 will still depend on sustained economic growth, a competitive environment and the group’s ability to grow sales and investment performance, the group said.
For 2QFY11 ended June 30, JobStreet’s net profit rose 20.14% to RM13.35 million from RM11.11 million a year ago driven by higher sales from higher recruitment activities.
Pre-tax profit grew 12.51% to RM17.7 million from RM15.73 million a year ago on the back of 21.8% revenue growth to RM36.22 million from RM29.74 million a year ago.
During the quarter, JobStreet’s operating expenses increased by 26.4% due to higher staff costs and marketing expenses, the group said in the notes to its financial results.
Earnings per share was 4.2 sen and net assets per share was 59 sen as at June 30.
Quarter-on-quarter, JobStreet’s net profit climbed 18.26% to RM13.35 million from RM11.29 million while revenue grew 7.73% to RM36.22 million from RM33.62 million in the preceding quarter.
For the six-month period, JobStreet’s net profit grew 24.64% to RM24.64 million from RM19.8 million while revenue increased 21.76% to RM69.85 million from RM57.36 million a year ago.
Analysts said JobStreet is on track to meet net profit forecasts of between RM47 million and RM48 million in FY11, with JobStreet’s 1HFY11 profit of RM24.6 million constituting roughly half of the full year forecast.
However, analysts are less upbeat on JobStreet’s earnings prospects in FY12 and FY13, with two research houses calling “hold” on its stock and one with a “sell” call.
In a recent note, HwangDBS Vickers Research cautioned that JobStreet’s earnings in the next two years could face downside risks, and had slashed JobStreet’s forecast earnings for FY12 and FY13 by 20% to 21%.
The lower earnings projection for FY12 was based on the assumption that job advertisements could fall 14% y-o-y instead of an earlier projection of 15% growth while earnings before interest, tax and amortisation (Ebita) margin could be squeezed to 41% from 43%, HwangDBS Vickers Research said.
“Historically, JobStreet’s revenue correlated strongly with GDP with each 1% growth in GDP raising revenue by 3% to 5%.
“The current monthly average of 23,000 job advertisements for 3QFY11 may not be sustainable in 2012,” the research house said in a report dated Oct 4.
Nevertheless, JobStreet’s share price could be supported by its high net cash backing and prospective 3% net dividend yield for FY12, HwangDBS Vickers Research said.
As at June 30, 2011, the company had net cash and equivalents of RM83.06 million, which translates into 25.5 sen per share. That accounted for 43% of its net assets per share of 59 sen.
HwangDBS Vickers also pointed out that Malaysia, JobStreet’s core market, currently appears less vulnerable to external turbulence as it is supported by the government’s Economic Transformation Programme (ETP), which aims to create 3.3 million new jobs by 2020.
Still, macro-economic challenges exist, and JobStreet is also facing higher competition and lower pricing for job postings from its main regional competitor, Hong Kong-based JobsDB Inc, which operates online recruitment websites in Southeast Asia, Australia and China.
JobStreet’s single largest shareholder is Australia-based recruitment website SEEK Ltd, which held a 22.3% stake as at May 9, 2011.
SEEK’s 69%-owned subsidiary, SEEKAsia Ltd, however, also holds an 80% stake in JobsDB.
In July, SEEKAsia increased its shareholding in JobsDB to 80% from the 60% block it acquired in December last year.
Poarch said JobStreet will continue to compete with JobsDB by leveraging its competitive advantage in Southeast Asia, ensuring quality customer service and keeping costs low.
Earlier this month, HwangDBS Vickers Research downgraded JobStreet to a “hold” while revising downwards its 12-month target price to RM2.30 from RM3.60 due to moderate growth prospects.
OSK Research, meanwhile, reiterated its “sell” call on JobStreet’s stock at a revised fair value of RM2.10 based on a forward price-earnings ratio of 13 times for FY12.
According to OSK Research, JobStreet is currently trading at a FY12 PER of 18 times, which the research house said is unjustified given the gloomy global economic outlook which is likely to dampen hiring sentiment.
Poarch shrugged off the valuations attached to JobStreet’s stock, saying, “We will just focus on building a strong, sustainable business and let the market decide the valuation”.
This article appeared in The Edge Financial Daily, October 24, 2011.
