JobStr obStreet eet Cor Corpor poration tion Berhad Berhad 11 11 th th Annual Annual Gener General al Meeting Meeting 23 23 Jun une e 20 2015 15
JobStr obStreet eet Cor Corpor poration tion Bhd Bhd Questions from the MSWG
JobStreet Corporation Berhad QUESTIONS FROM MINORITY SHAREHOLDER WATCHDOG GROUP Strategic/ Financial Matters 1. As stated on page 5 of the Annual Report 2014 (AR2014), the Group had received a dividend-in-specie comprising shares in 1010 Printing Group Ltd (1010 PGL) from Cinderella Media Group Ltd (CMGL). In relation to the investment in both 1010 PGL as well as CMGL; What is the Group’s shareholding in units and percentage? (i) (ii) What is the prospect and outlook for both 1010 PGL and CMGL? (iii) Why did the Group realise some instead of all of its shareholdings in CMGL? Our response: (i) As at 31 December 2014, the Group held 16.7m shares in CMGL representing 4.99% interest and 54.1m shares in 1010 PGL representing 7.03% interest. (ii) CMGL operates media advertising businesses in China and Hong Kong. The nature of the advertising industry is that it is closely correlated to economic conditions. In addition, print advertising faces competition and substitution from digital media advertising. In fact, CMGL has on 22 May 2015 issued a profit warning, citing the cessation of 1010 PGL as a subsidiary and a slowdown in its inflight magazine advertising business as factors which will negatively impact CMGL’s profit in 2015. Our Group has been consistently receiving dividends from CMGL since our entry in 2008. For FY 2014, CMGL distributed a total of HK$0.115 per share and our share of the cash dividends was RM2,709,669. We also wish to highlight that CMGL had on 11 June 2015 announced that its controlling shareholders had entered into a S&P agreement to dispose 183,632,000 shares representing 55.015% interest in CMGL to certain purchasers. Upon completion of the sale, the purchasers are required to make a mandatory general offer to acquire the remaining shares in CMGL. We are currently waiting for further details of this proposed transaction.
JobStreet Corporation Berhad QUESTIONS FROM MINORITY SHAREHOLDER WATCHDOG GROUP (CONT’D) Strategic/ Financial Matters (cont’d) On 1010 PGL, we wish to highlight that our holdings in 1010 PGL originally arose out of a spin-off of the group from CMGL in 2011. Subsequently, we had acquired more shares in addition to the dividend-in-specie of 1010 PGL shares received last year. 1010 PGL is involved in the printing industry with operations in Hong Kong, China and Australia. Although the group reported healthy growth in 2014, 1010 PGL has stated that margin erosion and escalating labour costs continue to plague its business. The strong USD could also lead to a reduction in orders from some of the group’s customers. Similar to CMGL, we have been consistently receiving dividends from 1010 PGL since 2011. For FY 2014, 1010 PGL distributed a total of HK$0.07 per share and our share of the dividends was RM1,463,135. As at 22 June 2015, our annualized return on investment in CMGL (since 2008) and 1010 PGL (since 2011) are 33.5% and 61.3% respectively. (iii) We wanted to liquidate our position in CMGL gradually and patiently, taking advantage of any upside in CMGL’s share price. CMGL has been one of our long term investments since 2008, and as such, we were not in a hurry to liquidate. We were also mindful not to disrupt the market by selling our entire holdings of CMGL quickly.
JobStreet Corporation Berhad QUESTIONS FROM MINORITY SHAREHOLDER WATCHDOG GROUP (CONT’D) Strategic/ Financial Matters (cont’d) 2. Please explain the impairment of RM2.8 million for the investment in a start-up business which operates mobile apps and sites promoting hotel room deals. When would the Board expect to see a reversal or recovery of the impairment? When did the Group invest in the start-up business and what are its plans going forward? When is it expected to turn profitable and are there any serious problems difficult to resolve? Our response: By way of background, the Group had invested USD800K into this start-up business in late 2013 together with another investor. JCB was a passive investor with day-to-day management handled by the entrepreneur and the co-investor. However, the business could not gain traction fast enough and required a lot more capital. When the start-up was not able to raise further rounds of funding from other investors, a decision was made to shut down the operations. Investments in start-ups are by nature risky with more failures than success stories. This is why we have stated before in our previous meeting that start-ups might not be something suitable for JCB if shareholders are not willing to accept lower profits or even losses in the short-term.
JobStreet Corporation Berhad QUESTIONS FROM MINORITY SHAREHOLDER WATCHDOG GROUP (CONT’D) Strategic/ Financial Matters (cont’d) 3. Moving forward, what are the plans of the Group to utilise its cash of RM135.9 million? (i) Whether the Company is going to redistribute the cash to shareholders? (ii) Whether the Board has any acquisition plans to be financed by the cash reserve and what is the timeline for such acquisitions? Our response: As mentioned in previous meetings, the Group intends to identify suitable businesses to be acquired at acceptable valuations. This process will take time. In addition, management has to commit some time to provide various transitionary services to the SEEK Asia group under a Transition Services Agreement. In 1-2 years time, we would have a better idea of where we stand and whether all or some of the cash should be redistributed back to shareholders. As you might already be aware, the Board has decided to maintain the current dividend policy of distributing 75% of our net profits, albeit at significantly lower profit levels going forward.
JobStreet Corporation Berhad QUESTIONS FROM MINORITY SHAREHOLDER WATCHDOG GROUP (CONT’D) Strategic/ Financial Matters (cont’d) 4. The associate, 104 Corporation, seems to be performing well within expectation. Please enlighten shareholders on its prospects and outlook. Would the Board not consider increasing its equity stake if an opportunity arises? Our response: As an online job portal and recruitment service provider, the prospects of 104 Corporation will ultimately depend on the economic outlook of the markets that it serves. The group is also investing in rolling out new product which may have an impact on its profit in the short term. Right now, our focus is on looking for new businesses in South East Asia which we will have control.
JobStreet Corporation Berhad QUESTIONS FROM MINORITY SHAREHOLDER WATCHDOG GROUP (CONT’D) Strategic/ Financial Matters (cont’d) 5. We noted that the Company has been carrying out share buy-backs in FY 2014 and continued to do so recently although the number of units purchased was small. What was the compelling reason to continue with share buy-backs considering that the Company may need to utilize its cash to execute its acquisition plans or to redistribute to shareholders? What are the plans for the treasury shares and why? Our response: The Board will only authorise management to carry out share buy-backs with the objective of enhancing shareholder value if, in its opinion, the Company’s shares are undervalued. The Board will take into consideration the desire to invest in new businesses before undertaking share buy-back activities, if any, in the future. In the past, the practice has been to cancel the said treasury shares. We believe it is better from a corporate governance perspective to cancel the treasury shares than to resell them to the market at a profit.
JobStreet Corporation Berhad QUESTIONS FROM MINORITY SHAREHOLDER WATCHDOG GROUP (CONT’D) Corporate Governance MSWG is promoting certain standards of corporate governance best practices in PLCs. In this regard, we hope the Board could address the following: In accordance with Principle 3 of the Malaysian Code on Corporate Governance 2012 (“MCCG 2012 ”), the 1) Board must justify and seek shareholders’ approval in the event it retains an Independent Director who has served in that capacity for more than 9 years. We noted that Datuk Ali bin Abdul Kadir has exceeded the tenure limit of 9 years for an Independent Director recommended by the MCCG 2012. In this respect, we do not notice any resolution being tabled for shareholders to retain Datuk Ali as Independent Director and the justification with regard to the compliance with tenure limit on Independent Director. Please explain. Our response: As stated on page 12 of the Annual Report, the Nomination Committee has conducted the performance evaluation and assessment of Datuk Ali (and Tan Sri Dato’ Dr Lin) and recommended that they continue to serve as Independent Non-Executive Directors of the Company and for the recommendations of the MCCG 2012 not to be adopted. This was also on the basis that the Nomination Committee was satisfied that Datuk Ali (and Tan Sri Dr Lin) have met the independence guidelines as set out in the Listing Requirements and that their objective judgments have not been compromised by their long tenures on the Board.
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