Daily BriefsJapan

Japan: Mitsubishi UFJ Financial (MUFG), Recruit Holdings and more

In today’s briefing:

  • Mitsubishi UFJ Financial Group – MS Continues to Dilute MUFG
  • Recruit Holdings [Alt Data]: HR-Tech Makes a Swift Recovery but Could Be Already Priced-In

Mitsubishi UFJ Financial Group – MS Continues to Dilute MUFG

By Thomas J. Monaco

*Morgan Stanley/Eaton Vance Transaction: Morgan Stanley (MS.US) announced its intention to acquire Eaton Vance for approximately USD 7 bn in a 50/50 cash/stock transaction. According to MS, this transaction is expected to be earnings break-even on deal consummation. We are less optimistic;  

*MUFG Should Worry About Dilution: Mitsubishi UFJ Financial Group (8306.JP) [MUFG] collectively owns 22.6% of the outstanding shares of MS on a fully diluted basis; prior to both the E*Trade Financial and Eaton Vance (EV.US) transactions MS represented an estimated and outsized 25.4% of MUFG’s FY (March) 2020 bottom-line – despite MUFG’s high reliance on gains.In aggregate, both transactions dilute MUFG’s MS stake by 3.57% to 18.99%. Both transactions are anticipated to dilute MUFG’s earnings attributable to Morgan Stanley by USD 175 mn or close to 9.0% YOY or 2.2% overall for MUFG in FY 2020 – assuming the status quo on securities gains; and

*MUFG Already Has Enough Headaches: Earnings at MUFG remain quite tenuous. Outside of its high reliance on volatile sources of securities trading, impairment losses associated with its ownership stake in Bank Danamon (BNMN.IJ),  earnings pressures from Union Bank in California,  the re-jigging of the systems integration at MUFG NICOS too should continue to weigh on future results. 


Recruit Holdings [Alt Data]: HR-Tech Makes a Swift Recovery but Could Be Already Priced-In

By Supun Walpola

Indeed.com’s (Indeed) and Glassdoor.com’s (Glassdoor) web traffic data for 2Q FY03/21 suggest that Recruit’s HR Technology segment may have recovered from its poor pandemic-hit 1Q. However, we believe Recruit’s potential recovery could be already priced-in.


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