Another interesting Chinese company that I keep track of is 51job Inc. (NYSE: JOBS). The Company has had a bumpy ride since its IPO in 2004. The stock debuted in the $20 range, shoot up to the $60s within three months just to fall back to the $20 range within a month and continue to erode to all time
lows. The stock price has never reached IPO price again... The story is that U.S. investors had a misconception of what this company is doing.
It's still not sure if this company is a "publisher of an
employment-listing newspaper" or a "leading provider of integrated human resource services in China". The latter would suggest it is comparable to Monster.com, a leading U.S. job placement site. Breaking down the revenue stream of the Company, it's still not clear how to approach this company. On the one hand, print advertisement comprised of 60 percent of total revenues in 2005 while online recruitment accounted for only 26 percent of total revenues. Still, dynamics are changing because while the print advertisement segment grew at an 18 percent rate in year 2005, the online recruitment segment grew by more than twice as fast at a 43 percent rate. Assuming this trend is about to continue, the Company will generate more from online recruitment than print advertisement in 2010. This is when a $60/share price will be justified.
But be careful. The Company keeps increasing its basic common shares.
In 2005, the Company completed a conversion of Series A preference shares into common shares, thus diluting its common share base. As a result, EPS decreased by 17 percent yet net income was virtually unchanged from 2004.
Despite all the confusion, I tend to have an optimistic feel on this one. Revenues have been growing steadily, and or course it's in China...