Although Monster (NYSE:MWW) has seen some recovery in North America, its international business still remains a big concern. Recent reports around hiring trends as well as the economic conditions of some Asian, Latin American and European markets give a mixed picture for the company. For example, online hiring activity slowed down in India in July, but there are indications that the euro zone may be coming out of recession, which could spur the recruitment activity in the region. Thankfully, Monster’s businesses in India and Korea are still profitable, and there appears to be signs of stabilization in some of the key markets in Europe such as the U.K. and Germany. However, a study conducted by LinkedIn (NASDAQ:LNKD) on global hiring trends suggests that Monster lacks on several fronts and needs to be much more competitive.
We believe that the company’s business may continue to suffer regardless of the global economic activity unless it makes some drastic changes to its business model and services. The international business constitutes just about 15% to Monster’s value according to our estimates primarily due to declining job postings and extremely low margins.
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Hiring Activity In Euro Zone May Increase, But India Is becoming A Concern
In August, the economic activity in the euro zone reached its highest levels in the last two years, according to a survey of corporate purchasing managers conducted by data and analytics firm, Markit Economics.  The firm’s composite output index, which tracks sales, employment, inventory and prices, rose to 51.7 in August, attaining the highest level in the last 26 months.  Germany and France are at the forefront of this revival. These countries’ economies grew faster than expected in the second quarter of 2013, making a material contribution to the overall euro zone gdp growth of 0.3%.  Monster will benefit as the region’s economy improves and hiring activity improves. Several investment banks have ended their summer hiring freeze and have started recruiting in Europe.
India is a different story, and worth considering as it is one of the few Asian countries where Monster is still churning out profits. The country is facing its worst economic crisis since 1991 with current account deficit widening, high short term debt and weakening currency. A large number of Indian corporates are under a very high debt load, and there is a good chance that the hiring activity in the region may decline. In July, the online hiring in the country fell by 4%. Monster will be in trouble if it loses its business in India. Earlier this year, the company had to pull out of certain Latin American markets including Brazil where it business turned unprofitable.
Hiring Trends Suggest That Monster Is Losing Competitiveness
LinkedIn published a research report in June on the U.S. talent acquisition trends. Here is a snapshot from that report that essentially states that the companies are becoming increasingly sophisticated in their hiring process and shortlisting through resumes may not be the primary way of initiating interactions anymore.
There is some judgement involved in the extent to which these trends can be applied for international markets. However, they do suggest that Monster is falling behind in the race for grabbing $27 billion+ global talent acquisition market where LinkedIn has set new standards.  Employers are increasingly using data to make more informed hiring decisions, and this is where LinkedIn has a huge advantage over Monster. Additionally, many LinkedIn members are employed and are known as “passive candidates,” the kind of candidates recruiters covet since conventional wisdom is that the best people already have jobs. Monster does not have a similar network as Monster.com primarily attracts candidates when they are either unemployed or are considering changing their jobs. This suggests that in a case where there aren’t many ‘explicit’ jobs in the market, LinkedIn can still grow its recruitment services business. In essence, Monster’s business model is getting outdated and the recruitment industry is rapidly expanding beyond traditional job boards.
Our price estimate for Monster stands at $5.65, implying a premium of about 30% to the market price.Notes: