Equity Analyst, LightStream Research

Shifara Samsudeen, ACMA, CGMA

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Equity Bottom-Up

<ul>
<li>Recruit Holdings (6098 JP) reported 3QFY03/2024 results on Friday. Revenues decreased YoY due to decline in HR Tech revenues, while Adj. EBITDA for the quarter increased YoY. Both Beat consensus estimates.</li>
<li>Weakening of labour markets and new pricing model have impacted HR Tech revenues, while cut down on investments have helped improve HR Tech margins.</li>
<li>The company has launched Indeed Plus to help improve earnings, which we don’t expect to have a major impact on <a href="https://www.smartkarma.com/entities/recruit-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:15070:1" rel="noopener">Recruit Holdings (6098 JP)</a> ’s earnings in the near term.</li>
</ul>


Recruit Holdings (6098 JP) reported 3QFY03/2024 results on Friday. Revenues decreased YoY due to decline in HR Tech revenues, while Adj. EBITDA for the quarter increased YoY. Both Beat consensus estimates.
Weakening of labour markets and new pricing model have impacted HR Tech revenues, while cut down on investments have helped improve HR Tech margins.
The company has launched Indeed Plus to help improve earnings, which we don’t expect to have a major impact on Recruit Holdings (6098 JP) ’s earnings in the near term.


Recruit: HR Tech Top Line Further Declines; No Big Impact From Indeed Plus in the Near Term

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>Last month, Reuters reported that activist-ish investor Value Act Capital Management had bought a stake in <a href="https://www.smartkarma.com/entities/recruit-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:15070:1" rel="noopener">Recruit Holdings (6098 JP)</a> and separately in <a href="https://www.smartkarma.com/entities/expedia-group-inc" target="_blank" data-smartkarma-citation="entities:6669:1" rel="noopener">Expedia Group, Inc. (EXPE US)</a>). </li>
<li>It was "revealed" in a letter to its clients. And there were reasons stated why Value Act thought Recruit was worth a lot more than it was trading for. </li>
<li>Today, Recruit announced an on-market buyback for ¥200bn. That's nice. But it is not enormous, and it may signal other info, and it is worth understanding details and context.</li>
</ul>


Last month, Reuters reported that activist-ish investor Value Act Capital Management had bought a stake in Recruit Holdings (6098 JP) and separately in Expedia Group, Inc. (EXPE US)). 
It was "revealed" in a letter to its clients. And there were reasons stated why Value Act thought Recruit was worth a lot more than it was trading for. 
Today, Recruit announced an on-market buyback for ¥200bn. That's nice. But it is not enormous, and it may signal other info, and it is worth understanding details and context.


Recruit (6098 JP) Buyback - It's Big But Not THAT Big; Value Act Effect Vs Corp Selldown Vs Multiple

<ul>
<li>Recruit’s share price had rallied 38% since November 2023 driven by the stake acquisition by the hedge fund ValueAct despite there being a decline in the company’s earnings.</li>
<li>Labour markets have further weakened in the December quarter while web traffic on Recruit’s job platforms Indeed and Glassdoor have significantly declined during the quarter.</li>
<li>Though <a href="https://www.smartkarma.com/entities/recruit-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:15070:1" rel="noopener">Recruit Holdings (6098 JP)</a> has guided for a decline in earnings, we think there is further downside to the company’s guidance.</li>
</ul>


Recruit’s share price had rallied 38% since November 2023 driven by the stake acquisition by the hedge fund ValueAct despite there being a decline in the company’s earnings.
Labour markets have further weakened in the December quarter while web traffic on Recruit’s job platforms Indeed and Glassdoor have significantly declined during the quarter.
Though Recruit Holdings (6098 JP) has guided for a decline in earnings, we think there is further downside to the company’s guidance.


Recruit: More Challenges Ahead for HR Tech Business

Japan Specialist

Mark Chadwick

<ul>
<li>We are bullish on Recruit at the current share price and believe that the stock has around 40% upside potential to our fair value estimate of Y7,700.</li>
<li>We believe that investors have been overly concerned with the cyclical slowdown in the job market as it normalizes from the post-Covid recovery</li>
<li>Indeed.com remains a disruptor in the HR recruiting market and the potential monetization of this asset is significantly under-appreciated by the market.</li>
</ul>


We are bullish on Recruit at the current share price and believe that the stock has around 40% upside potential to our fair value estimate of Y7,700.
We believe that investors have been overly concerned with the cyclical slowdown in the job market as it normalizes from the post-Covid recovery
Indeed.com remains a disruptor in the HR recruiting market and the potential monetization of this asset is significantly under-appreciated by the market.


Recruit Holdings (6098) | 2024 High Conviction

<ul>
<li>
<a href="https://www.smartkarma.com/entities/recruit-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:15070:1" rel="noopener">Recruit Holdings (6098 JP)</a>  reported 2QFY03/2024 results today. Revenues decreased YoY due to decline in HR Tech revenues, while operating profit for the quarter increased YoY. OP missed consensus marginally.</li>
<li>As we expected, the new pricing model has negatively impacted HR Tech revenues, and the segment’s earnings are forecast to decline further going into the second half.</li>
<li>There is further downside to earnings and the company's share price has moved up during the last few days, and we are set to nicely gain on the Short side.</li>
</ul>



Recruit Holdings (6098 JP)  reported 2QFY03/2024 results today. Revenues decreased YoY due to decline in HR Tech revenues, while operating profit for the quarter increased YoY. OP missed consensus marginally.
As we expected, the new pricing model has negatively impacted HR Tech revenues, and the segment’s earnings are forecast to decline further going into the second half.
There is further downside to earnings and the company's share price has moved up during the last few days, and we are set to nicely gain on the Short side.


Recruit 2Q: Earnings Further Slows Down; 2H To Be Even More Challenging

Japan

Recruit Holdings Co. Ltd. operates information providing services in human resource, housing, bridal, travel, restaurants, beauty, automobiles, and education and more. The company also operate staffing services and advertising business.

Recruit Holdings (6098 JP)

Recruit: HR Tech Top Line Further Declines; No Big Impact From Indeed Plus in the Near Term

Recruit's 3Q revenues declined YoY due to fall in HR Tech which was impacted by market weakness and a new pricing model. Indeed Plus is not...

Shifara Samsudeen, ACMA, CGMA

Recruit (6098 JP) Buyback - It's Big But Not THAT Big; Value Act Effect Vs Corp Selldown Vs Multiple

Recruit has announced a ¥200bn buyback. Last year's market buyback was ¥150bn. This is NOT "Value Act Effect" but it may be taken as such. That...

Travis Lundy

Recruit: More Challenges Ahead for HR Tech Business

Recruit's share price rallied more than 30% since November driven by stake acquisition of ValueAct. Labour markets have weakened further while web...

Shifara Samsudeen, ACMA, CGMA

Recruit Holdings (6098) | 2024 High Conviction

Recruit's stock has 40% potential upside, with the job market's cyclical slowdown being overly concerning to investors. The market undervalues the...

Mark Chadwick

Recruit 2Q: Earnings Further Slows Down; 2H To Be Even More Challenging

Recruit's 2Q revenues further declined due to slowdown in HR Tech business. The new pricing model has negatively impacted HR Tech, earnings are...

Shifara Samsudeen, ACMA, CGMA

Recruit: HR Tech Top Line Further Declines; No Big Impact From Indeed Plus in the Near Term

​Recruit's 3Q revenues declined YoY due to fall in HR Tech which was impacted by market weakness and a new pricing model. Indeed Plus is not...

Shifara Samsudeen, ACMA, CGMA

Recruit (6098 JP) Buyback - It's Big But Not THAT Big; Value Act Effect Vs Corp Selldown Vs Multiple

Recruit has announced a ¥200bn buyback. Last year's market buyback was ¥150bn. This is NOT "Value Act Effect" but it may be taken as such. That...

Travis Lundy

Recruit: More Challenges Ahead for HR Tech Business

​Recruit's share price rallied more than 30% since November driven by stake acquisition of ValueAct. Labour markets have weakened further while web...

Shifara Samsudeen, ACMA, CGMA

Recruit Holdings (6098) | 2024 High Conviction

​Recruit's stock has 40% potential upside, with the job market's cyclical slowdown being overly concerning to investors. The market undervalues the...

Mark Chadwick

Recruit 2Q: Earnings Further Slows Down; 2H To Be Even More Challenging

​Recruit's 2Q revenues further declined due to slowdown in HR Tech business. The new pricing model has negatively impacted HR Tech, earnings are...

Shifara Samsudeen, ACMA, CGMA

Recruit's 3Q revenues declined YoY due to fall in HR Tech which was impacted by market weakness and a new pricing model. Indeed Plus is not...

Recruit's share price rallied more than 30% since November driven by stake acquisition of ValueAct. Labour markets have weakened further while web...

Recruit's stock has 40% potential upside, with the job market's cyclical slowdown being overly concerning to investors. The market undervalues the...

Recruit's 2Q revenues further declined due to slowdown in HR Tech business. The new pricing model has negatively impacted HR Tech, earnings are...