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Saturday, September 19, 2009

Barron's touts Monster.com


Barron's:
  • Monster commands about 30% of the North American online job-search market of about $2.3 billion, second only to CareerBuilder's 35%, Sommer says, and 20% of the overall North American market of $5.3 billion, including print advertising, to CareerBuilder's 23% and HotJobs' 10%.
  • Monster also should benefit from a recession-inspired decrease in the size of corporate human-resource departments that is unlikely to reverse when the good times return. This offers more opportunity to online job sites. In the second quarter, Monster became the primary provider of online recruitment services for Microsoft, and signed a big insurance wholesaler, Burns & Wilcox, to a multiyear deal.
  • Monster is focusing on new technology to leverage its online presence. It has also moved into job sites for workers such as police and teachers, aiming to stem the competition from niche players and social-networking sites. And the company has a solid balance sheet, with $236 million, or nearly $2 a share, in cash and almost no long-term debt.

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I like the play. Monster (MWW 17.78) has a market cap of $2.24 billion. I think you can buy the stock, and play the options on this number also. The December 20 calls are .90 to 1. I think that is the leveraged play on that name.

Gannett (GCI 9.81) which owns 50.8% of CareerBuilder has a market cap of $2.3 billion. What is CareerBuilder worth?

We know that when Tribune was a distressed seller of assets, that they blew out 10% of CareerBuilder for $135 million last September when the stock markets were also under severe stress. For a comparative valuation, and using the information above, it's easy to come up with a $3 billion valuation for CareerBuilder, and since GCI has a majority stake, their valuation should be at least 10% higher, or at least $1.68 billion.

Thus CareerBuilder's valuation alone makes up 73% of the market cap of Gannett, or a bit more that $7 a share.

The leveraged play on Gannett and an increased CareerBuilder valuation are the January 11 calls on GCI at $1.3.

And that's my leveraged pair trade on these numbers, for those option jockeys that don't want to buy the stocks.

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