Morgan Stanley Overweight On 51job (JOBS)

Morgan Stanley has an Overweight rating on shares of 51job JOBS following the company's earnings report. In a note to investors, Morgan Stanley writes, "Average price per page for print advertising expanded 31% YoY on rising page volume contribution of high priced cities. 2) Online recruiting sales rose 57% YoY to 53% of total sales (a record high), with unique clients up 38% YoY and average spending per client up 14% YoY. 3) Other HR services continued to gain traction, as sales advanced 25% YoY (20% of total). 4) Operating margin continued to expand to 35%, a record high, thanks to rising sales contribution from online recruiting and operating leverage." Morgan Stanley writes, "Our DCF fair value of US$78.3 per ADS implies ~40% upside potential. On our estimates, 51job is trading at 20-25x 2012e P/E with operating profits forecast to grow 25-30% p.a. (2012-14e). In our view, 51job has a competitive edge over Baidu's online recruiting platform, Baidu Rencai, as: 1) its offline print adv business (~20% of total sales) helps it cover employers who do not have Internet presence, and its other HR services help boost customers' stickiness by raising their switching costs. 2) To date, 51job has accumulated over 38mn resumes, vs. less than 3,000 for Baidu. 3) 51job has over 15 years' experience in serving online recruiters by providing them various value added services beyond posting recruiting adv. 4) Baidu Rencai is only one of Baidu's many new business initiatives in recent years." Shares of JOBS gained $1.05 yesterday to close at $56.55, a gain of nearly 2%.