Friday, 21 February 2014

JobStreet: The devil is in the details

Everyone makes mistakes; even news agencies make mistakes - and, unlike certain local newspapers, they admit their mistakes readily for accountability and credibility. (My own mistake here.)

For example, two days ago, it was widely reported by the local and overseas Press that Seek Australia, through their Asian entity known as Seek Asia, had launched a RM1.73 billion takeover bid for the 78 percent shares of (Bursa Malaysia code: 0058) that they do not already own.

Two days are long enough for the dust to settle and it emerged yesterday that Seek Asia was not buying up the remaining 78 percent of JOBST shares in the Malaysian bourse but rather, they are buying the online recruitment business of in Malaysia, Singapore, the Philippines, Indonesia and Vietnam. The JOBST shares will still be available and listed, and that is the most important difference.

The online recruitment business of in these countries contribute more than 80 percent of the JobStreet Groups profit before tax. Which means to say, once the online recruitment business of are disposed off, what's left of the company will remain a small fraction of the present business. Interestingly, the operations in India have not been sold off together for whatever reason.

Almost all of the RM1.73 billion payment from Seek Asia, except for RM30 million to meet the administrative costs and corporate fees of this takeover exercise, will then be distributed to all existing shareholders of JOBST (including the 22 percent presently held by Seek Asia, which means Seek Asia is paying themselves back for the 22 percent that they hold of JOBST*) through a special cash dividend.  The news agencies worked it out to a price of RM2.72 per share. I've no idea how they came around to this figure but it must have been based on around 640 million issued JOBST shares.

(* It is a bit more complicated than my description because technically, the pro-rata special cash dividend that Seek Asia will receive will be netted off from the RM1.73 billion which they will pay.)

But in yesterday's filing with Bursa Malaysia, had also mentioned that post-disposal and post-distribution, the JOBST shares would have increased to 708 million. I wonder whether the extra 68 million shares would be included in the payback to the shareholders. If so, be prepared for the share valuation to be less than the RM2.72 per share. Perhaps only RM2.40 per share.

Also, once the distribution is completed, we have to expect the value of JOBST shares to plunge off a cliff - shaving off perhaps 90 percent of its current value - because the company will no longer be supported by the ongoing online recruitment business. Already, the company is prepared for an eventual reclassification with a PN17 or PN16 status by Bursa Malaysia.
Anyhow, there should be an extraordinary meeting called for the shareholders soon in order to approve this disposal and distribution. I've never attended any shareholders meeting before but I think that I should try to make it for this one if my time permits. For old times' sake, I should be there to say a proper goodbye to the one company that was an exemplary success for Malaysia.  

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