Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Equity Bottom-Up

<ul>
<li>Last December, <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> announced a ¥200bn buyback which sounded big but with lots of cross-holders, wasn't huge. The stock is up 80% in 6+ months since.</li>
<li>Today, the company announced a new buyback of ¥600bn. This is very aggressive, and at 25x EBITDA and 40x PER, is probably due to demand to sell. </li>
<li>Crossholders now hold ¥2trln which is three-plus times this buyback. And if the price were to rise 10% a year for 3yrs, it would be four times.</li>
</ul>


Last December, Recruit Holdings (6098 JP) announced a ¥200bn buyback which sounded big but with lots of cross-holders, wasn't huge. The stock is up 80% in 6+ months since.
Today, the company announced a new buyback of ¥600bn. This is very aggressive, and at 25x EBITDA and 40x PER, is probably due to demand to sell. 
Crossholders now hold ¥2trln which is three-plus times this buyback. And if the price were to rise 10% a year for 3yrs, it would be four times.


Recruit (6098 JP) - BIG Headline Buyback But Disappointing if That Is Best Use Of Cash

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.

<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 4Q and full-year FY03/2024 results today. Earnings beat own guidance as well as consensus estimates.</li>
<li>Weakening labour markets have negatively impacted all business segments and new pricing model for Indeed has not really been successful.</li>
<li>Recruit expects a recovery in 2HFY03/2025, but at the rate at which job openings are going down, we remain cautious.</li>
</ul>



Recruit Holdings (6098 JP) reported 4Q and full-year FY03/2024 results today. Earnings beat own guidance as well as consensus estimates.
Weakening labour markets have negatively impacted all business segments and new pricing model for Indeed has not really been successful.
Recruit expects a recovery in 2HFY03/2025, but at the rate at which job openings are going down, we remain cautious.


Recruit: As We Said… Weakening Earnings

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 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

<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

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.

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Recruit Holdings (6098 JP)

Recruit (6098 JP) - BIG Headline Buyback But Disappointing if That Is Best Use Of Cash

Dentsu just announced a ¥600bn buyback. That is huge in yen terms but Recruit has a lot of cash to offset large crossholder selling interest....

Travis Lundy

Recruit: As We Said… Weakening Earnings

Recruit's earnings beat consensus, but all three segments are expected to see further slowdown with weakening labor markets. As expected new...

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: 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: 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

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Recruit (6098 JP) - BIG Headline Buyback But Disappointing if That Is Best Use Of Cash

Dentsu just announced a ¥600bn buyback. That is huge in yen terms but Recruit has a lot of cash to offset large crossholder selling interest....

Travis Lundy

Recruit: As We Said… Weakening Earnings

​Recruit's earnings beat consensus, but all three segments are expected to see further slowdown with weakening labor markets. As expected new...

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: 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: 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's earnings beat consensus, but all three segments are expected to see further slowdown with weakening labor markets. As expected new...

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...