JobStreet Corp Bhd
(Dec 11, 28.5 sen)
Maintain “hold” with a target price (TP) of 30 sen: Jobstreet’s special dividend payment of RM2.65 per share following the asset disposal completion to Seek Ltd went ex yesterday.

Ex-special dividend, our TP falls to 30 sen, now based on 16.8 times calendar year 2016 price-earnings ratio (PER), about a 30% discount to the IT services sector PER of 24 times. We maintain a “hold” rating on the stock.

While we see compelling value in Jobstreet’s remaining assets, we think that it will take a considerable amount of time for the company to expand these assets due to its limited market reach in the employment segment and strong competition in the automotive segment.

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Although Jobstreet has completed the asset disposal transaction, it will still be involved with the business transition, as required under the transition service agreement. We estimate that the transition process will last until end of first quarter of 2015. This could result in an overhang on Jobstreet’s share price in the near term, given the lack of visible growth strategy.

Nonetheless, the group’s balance sheet position remains strong, with steady free cash flow generation and a net cash position of RM44 million, or net cash per share of 6 sen as at Sept 14.

We expect Jobstreet to require minimal capital expenditure for expansion given its asset-light strategy, but the management could take a longer time to grow the remaining assets given the strong market competition.

One of Jobstreet’s remaining assets is Autoworld.my, an online car listings portal. We like its diversification beyond the employment segment, but think that the auto segment faces strong competition.

The bigger car listing portals such as Carlist.my and Mudah.my have already captured the majority of the listings available.

We maintain a “hold” rating. While we see compelling value in Jobstreet’s remaining assets, we prefer to wait for better earnings visibility before turning positive on the company. — CIMB Research, Dec 11

This article first appeared in The Edge Financial Daily, on December 12, 2014.