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Several years experience as an analyst in the hedge fund world. Investment knowledge includes long/short equities, credit, macro, arbitrage, distressed debt, and special situations. Previous research publication experience includes Japanese small cap research distributed to institutional investors. Education credentials include BS in Computer Science, MBA in Finance, and CFA Charter. Follow on Twitter @ChinaStockRsrch Follow on StockTwits @ChinaStockResearch

51job, Inc. (JOBS): What to Look For in 1Q15

51job, Inc. (ADR) (NASDAQ:JOBS) is set to release Q1 earnings today after market close, and although the financials are of course in focus, the company’s operating metrics should also be a key area of interest. Over the past several quarters, customer acquisition has been a priority, which has resulted in the number of Unique Employers growing about +23% YoY for each quarter over the last two years. At the end of FY2014, the company was closing in on 300,000, a significant improvement from sub-200,000 level a few years earlier.

And although the number of customers has been on an improving trend, monetization of these new customers has lagged, in part due to the typical learning curve associated with new users of the company’s online job listing service.  This explanation has become almost expected on earnings conference calls, and any progress on developing these customer relationships would likely be very welcome news for investors.

Competition in the online job search segment appears to be heating up, suggesting that sales and marketing expenses may not be headed down anytime soon, so improving ARPU could deliver an immediate fix to help offset higher costs.

Another topic to look for in the Q1 update is on the business development front. 51job rolled out a new product at the end of the year, Jingying, targeting the higher-end of the candidate pool, a segment it previously underserved. This area of the market could be a significant area of opportunity for the company, particularly if a slowing economy increases the competition for talent, so hopefully management will share recent developments.

Additionally, at the end of FY2014, management mentioned that it was making some moves on the M&A front, but was tight-lipped with details, instead sharing its expectations for deals to close sometime in Q2. After seeing some moves in the competitive landscape recently ( acquiring, a 51jobs competitor), management may feel the need to step up its dealmaking pace.

The stock has largely missed out on the China-inspired rally which kicked off in mid-March, rising just +2% while the PowerShares Gld Drg Haltr USX China(ETF) (NYSE ARCA:PGJ) added over 20. Competitor Zhaopin Ltd (ADR) (NYSE:ZPIN) hasn’t fared much better, and is flat over the same period.


Management’s EPS estimate for revenue was about 470 million RMB (76 million USD), which seems achievable, based on the following logic:

  • Ho-hum new customer additions: unique employers would need to grow about 8% QoQ, which would be a relatively slow pace for Q1 growth when compared to the last few years.
  • Flat ARPU: assuming ARPU is flat is a conservative approach based on recent trends that new customers haven’t been as heavily spending as those more familiar with the platform.
  • Other HR business sharply lower: backing out the Other HR business revenue from management’s guidance and previous two assumptions, revenue could fall about 17% and still make the company’s estimate. This seems reasonable due to limited campus recruitment in Q1 and headwinds facing the BPO industry in China.

The company has missed expectations twice, significantly, over the past four quarters. If 51job can manage a decent surprise this quarter, the stock may move sharply higher.

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