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’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

<ul>
<li>Recruit’s share price is down more than 10% over the last 30-days despite there being a significant improvement in job openings in the US for the month of August.</li>
<li>The web traffic on both Glassdoor and Indeed also have declined in September compared to August where there was a MoM improvement in August 2023.</li>
<li>Though Recruit has guided for a decline in earnings, we think there is further downside to the company’s guidance.</li>
</ul>


Recruit’s share price is down more than 10% over the last 30-days despite there being a significant improvement in job openings in the US for the month of August.
The web traffic on both Glassdoor and Indeed also have declined in September compared to August where there was a MoM improvement in August 2023.
Though Recruit has guided for a decline in earnings, we think there is further downside to the company’s guidance.


Recruit: Share Price Continues to Fall with Labor Markets Further Slow Down

<ul>
<li>The job openings in the US declined to 8.827m in July 2023, marking the lowest since March 2021, and falling well below projected 9.465m job openings for the month.</li>
<li>On the other hand, web traffic 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 job platform Indeed has declined in July compared to June 2023 while it has improved slightly on Glassdoor.</li>
<li>HR Tech segment’s top line growth declined 9.1% YoY in 1QFY03/2024 and the company has shifted into a new pricing model which we think would further impact segment’s growth.</li>
</ul>


The job openings in the US declined to 8.827m in July 2023, marking the lowest since March 2021, and falling well below projected 9.465m job openings for the month.
On the other hand, web traffic on Recruit Holdings (6098 JP) ’s job platform Indeed has declined in July compared to June 2023 while it has improved slightly on Glassdoor.
HR Tech segment’s top line growth declined 9.1% YoY in 1QFY03/2024 and the company has shifted into a new pricing model which we think would further impact segment’s growth.


Recruit Holdings: Weakening Job Markets and New Pricing Model to Impact HR Tech Further

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: 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 Holdings: Weakening Job Markets and New Pricing Model to Impact HR Tech Further

US job openings hit a low of 8.827m in July 2023, below the projected 9.465m. Web traffic on Indeed has further dropped. The new pricing plan is...

Shifara Samsudeen, ACMA, CGMA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

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: Share Price Continues to Fall with Labor Markets Further Slow Down

​Recruit's share price is down more than 10% over last 30-days with weakening of labour markets. Though Recruit has already guided for earnings...

Shifara Samsudeen, ACMA, CGMA

Recruit Holdings: Weakening Job Markets and New Pricing Model to Impact HR Tech Further

​US job openings hit a low of 8.827m in July 2023, below the projected 9.465m. Web traffic on Indeed has further dropped. The new pricing plan is...

Shifara Samsudeen, ACMA, CGMA

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...

Recruit's share price is down more than 10% over last 30-days with weakening of labour markets. Though Recruit has already guided for earnings...

US job openings hit a low of 8.827m in July 2023, below the projected 9.465m. Web traffic on Indeed has further dropped. The new pricing plan is...