Intelligent Investing
Is SEEK overpaying for Jobstreet?
I am putting this up for discussion and hope to improve my analytical thinking. Any comment is most welcome.
I had a lookup on the financial data of Jobstreet for 2013.
Pre-tax earnings - RM84.8m (78% is RM66.1m)
After-tax earnings - RM61.4m (78% is RM47.8m)
Free cash flow - RM46.3m (78% is RM36.1m)
Seek.com is paying RM1.7B for the remaining 78% of Jobstreet that they haven't own. So the multiples are:
Pre-tax earning - 25.7x
After-tax earnings - 27.6x
Free cash flow - 47x
Those are quite some rich valuation although make no mistake Jobstreet is an excellent business possessing a strong moat and run by well and able management. Their earnings growth, ROE and FCF have been outstanding for the past 5-10 years. Unless I miss out something (my understanding of the industry is same as anyone), it will take Seek.com quite some time to recoup this investment.
But if consider, back in 2012, Japan giant Recruit Co. a recruitment/HR/Job classified company, acquired Indeed.com for an estimated $750m to $1b, since both are private companies so the exact price is unavailable. Sources mentioned that Indeed had a revenue of $150m and $25m in profit back then. That means Recruit Co. paid about 30-40x earnings to acquire Indeed.com. With that as a comparison, Seek/Jobstreet deal does look cheap.
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Be the first to like this. Showing 8 of 8 comments
JT U r understading of d deal is wrong..
But if wat u r claiming in ur title is correct.. tis is a very lousy deal..
SEEK is overpaying n JOBST is dropping like mad.. no winner
2014-02-25 09:36
Care to explain which part of the understanding is incorrect? Do you mean the share prices or business dynamic is dropping?
2014-02-25 10:13
SEEK is not buying 78% of JOBST itself.. bt a sub group named jobst owned by it
2014-02-25 10:35
oh alright I get that, yea a few companies buying not just SEEK, SEEK being the largest of all.
2014-02-25 11:36
Errr.. no la.. SEEK is d only buyer.. but SEEK is not buying JOBST itself.. only part of JOBST's biz..a sub group named jobst.. wat qualification u hv o?
2014-02-25 11:59
ohok got what you mean, yea my calculation is rough, but that business sold is close to 95%+ of the whole Jobstreet. Me? I got a degree in hospitality lol.
2014-02-25 12:08
o.. degree in taking care hotel.. gud ler
so tis is very lousy deal isn't it?
SEEK is overpaying n JOBST is dropping like mad.. no winner
2014-02-25 12:37
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This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
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Base on the title my answer is yes. Can Jobstreet EPS grow more than PE multiple? You can see latest quarterly result if this is true. I would rather buy Star than Jobstreet base on PE and DY although Star is not a growth stock.
2014-02-25 03:27