Did Monster overpay for ChinaHR?

| About: 51job, Inc. (JOBS)

From the words of management, it sure sounds like it. But Monster (ticker: MNST) is extremely excited about ChinaHR's prospects. Here are some key points from today's conference call.

The deal:

  • MNST acquired a 40% stake in ChinaHR.com, with the right to acquire a 51% or more interest in three years or in the event of an initial public offering

Investment makes sense from an economic perspective:

  • Growing economy - 9.5% growth in 2004
  • Rapid advances in privatization
  • Worker movement to urban
  • Number of newly employed urban residents recently hit 9.8
  • Estimates as high as 70% of urban Chinese
    workers changing jobs at least once already
  • Per capita net income growth of approximately 6.8% in 2004
  • China's dominant and growing position as the factory for the world

Why ChinaHR?

  • It's one of China's leading and most recognized online recruitment websites
  • Sizeable user base - 3.2 million registered users, 280,000 corporate clients
  • Similar to MonsterTRAK, they work with 100 colleges and universities in China
  • MNST believes ChinaHR is several years ahead of the competition
  • ChinaHR did approximately $7 million in revenues in 2004. MNST expects that to possibly double in 2005

Why the high valuation?

  • Because of the success of 51Job (ticker: JOBS) and market potential, valuations have increased in China
  • MNST wanted ultimate control of ChinaHR

Why ChinaHR over 51Job (ticker: JOBS)?

  • ChinaHR has a similar business model to MNST:
    • Charges for jobs
    • Does not charge slotting fees
    • Generates sizeable online revenue
    • Campus business similar to MonsterTRAK

Why didnt MNST buy all of ChinaHR?

  • ChinaHR wanted to retain control at least for the moment
  • They are hoping to do an IPO

Is MNST looking for other China investments / acquisitions?

  • No