The Edge Financial Daily

JCBNext an undervalued gem with strong track record

Billy Toh / The Edge Financial Daily

KUALA LUMPUR: JCBNext Bhd is one of the few listed companies in Malaysia that has a strong balance sheet despite the absence of a core business. The company, formerly known as Jobstreet Corp Bhd, has been without a core business since the disposal of its online job portal two years ago.

The group’s assets consist primarily of investments in associates, short-term investments, available-for-sale investments, cash and investment in properties. Its financial statement for the third quarter ended Sept 30, 2016 showed total assets of RM321.5 million versus total liabilities of only RM2.25 million, giving a total net asset of RM319.3 million or RM2.28 per share.

One of JCBNext’s associate companies is 104 Corp, which is the largest job site in Taiwan and is listed on the Taiwan Stock Exchange. JCBNext is the single largest shareholder of 104 Corp with a 23% stake.

Another associate is Innity Corp Bhd, a leading provider of interactive online marketing platforms and technologies listed on Bursa Malaysia’s ACE Market, in which it is the second largest shareholder.

Bloomberg data shows that Innity Corp has remained profitable since 2010, and 104 Corp has been profitable since its listing in 2006. It also shows impressive total return of investment in the last five years for Innity Corp and 104 Corp at 245.2% and 117.7% respectively.

JCBNext’s short-term investment of about RM94.5 million is in ringgit-denominated money market funds, while its cash holding amounted to RM33.6 million as at Sept 30, 2016.

The group’s available-for-sale investment comprises investments in quoted and unquoted shares, both in and outside of Malaysia, including Asiatravel.com Holdings Ltd, 1010 Printing Group Ltd, Uniplaces Ltd and a portfolio of quoted securities managed by Kumpulan Sentiasa Cemerlang Sdn Bhd. As of Sept 30, 2016, it was valued at RM52.9 million.

According to a valuation by an independent party, BDO Capital Consultants Sdn Bhd during a recent mandatory general offer (MGO) exercise, JCBNext was deemed to be worth RM2.58 per share using the revalued net asset value (RNAV) approach. BDO estimated the RNAV of JCBNext at RM361.19 million, which translates into RM2.58 per share, representing a 42.5% upside to JCBNext’s closing price of RM1.81 last Friday.

The MGO was made by the group’s founder and chief executive officer Mark Chang Mun Kee and chief technology officer Albert Wong Siew Hui. The duo offered to acquire JCBNext shares not already owned by them at RM1.20 apiece.

The MGO last November was triggered when Chang acquired 28.2 million shares or 20.2% of JCBNext from SEEK International Investments Pty Ltd for RM33.8 million or RM1.20 a share. This raised the collective shareholdings of Chang and Wong from 37.96% to 58.13%.

In an announcement at that time, Chang said he acquired the additional shares as it was an opportunity for him to have a controlling stake in JCBNext and thereby enable him to exert control over the business operations of the company.

An analyst who has been following the company shared with The Edge Financial Daily that the recent acquisition could be a signal that the company has found its next venture.

He added that the MGO was probably a non-event that had to be made in view of the law and regulations, and that Chang had managed to obtain a good deal for the controlling stake of the company. JCBNext’s announcement to Bursa showed that only those holding 0.16% of the total outstanding shares accepted the offer.

Recall that Chang told the media back in 2015 that the company was adopting a conservative approach and focusing on spending the next two years studying the market, before deciding its future direction.

While it is too early to tell the next venture for JCBNext, Chang appears to be well in control of the company after the latest acquisition, as he on his own holds a controlling stake of 50.2%.

Future direction aside, JCBNext’s valuation remains attractive based on its investment in associate companies that are doing well as well as its diversification into cash and other assets. The company also has a proven track record in terms of its earnings and share price movement.

JCBNext has been profitable since its listing in 2004 and an investor holding the stock from that time would have seen a whopping return of 1,502%, or an annualised return of 23.8%.

However, JCBNext’s appeal to investors appears to have dwindled as evidenced by its 200-day average volume of 65,577, due probably to the absence of a core business.

http://www.theedgemarkets.com/article/jcbnext-undervalued-gem-strong-track-record