(By Mani) Monster Worldwide Inc. (NYSE: MWW) is expected to complete the strategic alternatives process shortly.The delay in the completion may irk impatient investors to sell the stock, and weak share prices may force the recruiter to settle for a low premium in the case of M&A.
Monster Worldwide Inc provides online employment solutions through its websites (such as Monster.com and chinahr.com). It has a presence in roughly 50 countries around the world offering job seeking, career management, recruitment, and talent management products and services. In August 2010, Monster acquired Hotjobs.com.
It has been about seven months since the company hired Stone Key
Partners LLC and BofA Merrill Lynch as financial advisors in connection
with its review of strategic alternatives.
"While we believe there is interest in parts of MWW's business, we think management's preference is to keep the company intact. With the stock weak recently, we still do not expect any deal to come at significant premium to current levels," UBS analyst John Janedis said in a client note.
Meanwhile, Monster Europe continues to remain soft with Western Europe weakening further, while postings in Asia have also begun to show signs of a decline. Although trends in the U.S. have appeared to have stabilized, Monster continues to be impacted by the challenged global recruitment market.
"We assume that there's a 60% chance based on 6x/10.5x our '13 FCF/shr and EV/EBITDA. Assigning a 60% weighting to our $6.50 public value and 40% our $8.50 takeout estimate, we arrive at a $7.25 probability weighted target until there is certainty about whether or not a deal will get done," Janedis noted.
Without a deal, shares could trade down to $6, and the company may resort to large restructuring, including job cuts, to reduce expenses.
For the second quarter ending June 30, Monster Worldwide reported lower GAAP earnings of $4.80 million or 4 cents per share, compared to $10.99 million or 9 cents per share last year. Excluding items, it earned 6 cents per share, in line with Street view. Revenue for the quarter declined to $237.0 million from $269.7 million a year-ago. Analysts estimated revenues of $243.30 million for the quarter.
Quarterly bookings of $242 million decreased 4 percent from the second quarter 2011 bookings of $251 million. Both Europe and Asia have been negatively impacted by global economic challenges and currency translation.
In light of continued global economic weakness, particularly in Europe, and the impact of currency translation, third-quarter bookings are expected to be down 10 percent to flat compared with the prior year. Third-quarter revenue is expected to be down between 6 percent and 12 percent, and earnings are estimated to be 2- 7 cents per share. Analysts currently project third-quarter earnings of 5 cents per share.
Cash and cash equivalents were $158 million as of June 30, 2012 compared to $250 million as of December 31, 2011. Net operating cash flow was $6.9 million in the quarter. Deferred revenue as of June 30, 2012 was $372 million, compared to $380 million as of December 31, 2011. Monster Worldwide has a market cap of $852 million and a price-to-earnings ratio of 40. Shares of the company have increased 7 percent in the past month amid renewed acquisition rumors. The takeout factor is instrumental in boosting the shares.
Investors should exercise caution with respect to Monster Worldwide because adding positions primarily on acquisition potential is a dangerous game.