Rarely do you find a business that possesses all the right combination of attributes that you look for in an investment. A company which warrants a ‘permanent holding’, to borrow a term from Warren Buffet, is JobStreet due to its great business model, its secular growth trend, and its talented management. Based on its price of RM1.79 (as at 20 Nov 2006), an investment in JobStreet since its listing in Nov 2004 would have generated a total return of 237.9% over the two year period or an annual return of over 84.7%.
Company Background
Started in 1995 by three young Malaysian engineering graduates using their own savings, the business was originally known as Malaysia Online (MOL).
In the early part of its history, MOL operated a portal offering e-commerce. After experimenting with various business models, its management decided in 1997 that the company’s potential lies in providing online recruitment services. Although funding was initially a problem, MOL received an offer to buy over the company in 2000 for its perceived brand value.
The shareholders kept JobStreet’s business, but perhaps even more importantly, made a bold decision to inject their proceeds from the sale of around RM10m into the company.
JobStreet provides recruitment services, or, more accurately, it provides a virtual marketplace for the matching of demand and supply of jobs for white collar workers. It took the company 7 years to achieve the economies of scale required to break even, during which time it had to raise new capital from several venture capitalists.
Since the company made a maiden pre-tax profit of RM2.9m in 2003, there has been no looking back. By 2005, earnings had pentupled to RM16.3m. It was listed on MESDAQ in 2004, and today is self-sustaining with cash holding of almost RM40m. The total shareholder return since IPO has been a whopping 237.9%.
Reasons for success
1) Excellent product
Like many other great businesses, JobStreet’s core strength lies in its outstanding product. Media is a good business to be in if economies of scale can be attained, and it is an even better business to be in if some of its shortcomings can be resolved by harnessing the capabilities of the Internet.
Jobstreet’s value proposition for its online recruitment service is extremely compelling. To employers, it provides access to a huge database of candidates, and a highly targeted one too, that can be profiled by age, qualifications and experience. To employees, it is a free service that delivers a large number of vacancies matched against their own needs.
As to be expected, online recruitment is highly automated, with most stages of the process conducted online. This ranges from registering resumes and career preferences by job seekers, to posting job advertisements by employers, and facilitating the matching work and communication in between. Productivity is enhanced substantially as a result.
For all its conveniences, the cost of online advertising is a fraction that of print media’s as the savings on paper and printing are largely passed on to the advertisers.
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