AGAIN, all eyes are on JobStreet Corp Bhd (JCB) following the sale of its job portal JobStreet.com to Australia-based SEEK Asia Investments Pte Ltd in a RM1.89 billion deal. Following the redistribution of nearly all of the proceeds to shareholders via a special dividend of RM2.65 per share, plus an additional interim dividend of 1.75 sen per share, JCB is now considered a “shell company” with no main revenue source.
However, the company’s shares saw a tremendous increase just after the dividend payout on Dec 24. In four trading days — Dec 26 to 31 — JCB’s share price recorded a 46% gain. The stock peaked at 59.5 sen on Dec 30, which represents a multi-year high after adjusting for dividends.
Speculation has been rife that there will be a major development at JCB, given that it has just wrapped up the portal deal and needs to regularise its business and financials. Without a core business, the company is likely to be classified under Practice Note 17, as per Bursa Malaysia’s listing requirements.
The recent rally has been attributed to expectations that a new core business will be injected into the company or new shareholders will emerge. Adding to the speculation is the management’s move to buy the company’s shares.
In a reply to The Edge, JCB CEO and founder Mark Chang Mun Kee poured cold water on the speculation, saying that there are no immediate announcements. “(There is) no announcement related to (our) future growth plans. In the absence of any news, we are not aware of why the shares would rise after the payment of the special dividend.”
It may be the case that investors are excited about the company’s future plans. Not only does Chang have a successful track record in founding successful technology start-ups — first with MOL Online and then JobStreet.com — he is said to be keen on using JCB as a listed entity for his next billion-ringgit idea.
The insider activity was not just limited to the company buying back its own stock, the latest being some 764,200 shares purchased on Dec 12 at 28 sen apiece. Prior to the special dividend payout, Chang and non-executive director Ng Kay Yip had increased their stakes via several purchases.
The speculative rally itself may have been fuelled by the fact that JCB’s shares are now cheaper to buy in absolute terms, having traded in the RM2 to RM3 ringgit range prior to the special dividend ex-date. Some observers note that the company’s current net asset per share of 36 sen is very conservative after taking into account the value of its existing assets.
For example, its 23%-owned associate 104 Corp, which is listed on the Taiwan Stock Exchange, has been reporting impressive profits. The Taiwanese job listings website recently reported its latest quarterly net profit of some TWD102.6 million (RM11.35 million), its most profitable quarter in seven years.
Not only does this directly translate into a higher profit contribution to JCB, the parent company is also enjoying substantial unrealised gain from its shareholding in 104 Corp. The firm’s stock price has gained 55% year to date, as at Dec 29’s closing at TWD166.5.
The closing price means that JCB’s shareholding of about 7.66 million shares in 104 Corp is now valued at around US$40.12 million (RM140.35 million), or a US$10.72 million gain compared with the beginning of 2014.
Interestingly, management has hinted that it may dispose of its other equity interests following the Jobstreet.com sale. In all, the group’s available-for-sale investments in quoted securities, stakes in associates and other short-term investments carried a market value of RM163.09 million as at Sept 30.
In its latest annual report, the company said it would also explore ways to maximise returns to shareholders, which may include a sale of the remaining assets in JCB.
According to Bloomberg data, JCB’s other key stakes include a 7.03% stake in Hong Kong-listed 1010 Printing Group and 21.13% in Innity Corp Bhd. It also owns a 5% stake in Cinderella Media Group Ltd as well as a small stake in Asiatravel.com Holdings Ltd, which is listed on the Singapore Exchange.
While profit contribution from these associates has grown steadily, to RM6.03 million as at Sept 30 for the first nine months of 2014 compared with RM4.06 million over the same period last year, it is clear that JCB will have to create or acquire a new core business soon. Excluding assets sold, its net cash stood at RM43.3 million as at Sept 30, which comes up to net cash per share of 6.6 sen.
Despite its zero borrowings and light balance sheet, JCB will have to accumulate more financial firepower to start over as a new business, particularly if it chooses to pursue the merger and acquisition (M&A) route. As the sale of JobStreet.com to SEEK Asia Investments has shown, valuations for Asia’s technology start-ups have grown by leaps and bounds due to the region’s massive growth opportunities.
Creating a start-up would typically be highly capital intensive and comes with a lengthy gestation period. This raises concerns on whether a new venture would immediately generate revenue and profits for JCB.
Chang remains mum on the possibility of selling JCB’s stakes in the companies in order to finance its future endeavours, or possibly to reward its shareholders with another distribution of proceeds. “These are companies we like and we’re happy to have them as our associates. No comments with respect to our future plans,” he says.
In the meantime, the management team may have a multitude of pressing matters to deal with. It has a one-year commitment to help SEEK Asia Investments manage the transition of the Jobstreet job portal while figuring out the company’s next move.
Chang says management is confident of charting a new path for JCB. “Our company is in a healthy financial position, with assets and operations that are contributing positively. The board will review new opportunities when they present themselves,” he says.
This article first appeared in The Edge Malaysia Weekly, on January 5 - 11, 2015.
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