Daily Brief Equity Bottom-Up: Recruit (6098 JP) – BIG Headline Buyback But Disappointing if That Is Best Use Of Cash and more

• 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.

• The company announced a settlement with its subsidiary of 18 mn HKD. This is material as we estimate that core profit for FY24 (June-end) would be 30-35 mn HKD. 
• This settlement will be paid in cash (tranches) as it involves making the company whole on a vendor’s profit guarantee shortfall. It boosts cash and investments >340 mn HKD. 
• The stock is cheap, with net cash almost equal to the market capitalization, an 11x PE (on core profit), and a 9% dividend yield. 

• AI advancements will increase data center power demand by 160% by 2030, consuming 8% of U.S. electricity.
• A single ChatGPT query uses 2.9 watt-hours of electricity, compared to 0.3 watt-hours for a Google search.
• 2 of the 5 top performing stocks year-to-date in the S&P 500 are utility companies Vistra Corp and Constellation Energy. Utility sector has gained 6.7% in 2024. 

• HDFC Bank is the largest private sector bank in India known for its strong track record of compounding book value and EPS
• The recent merger with Housing Development Finance Company initially received positive market reaction but has since caused a decline in HDFC Bank’s stock price
• Despite the stock underperformance, the merger offers potential cross-selling opportunities and a bright future for HDFC Bank

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only. This article was originally published 3 months ago on Value Investors Club.

• Schlumberger’s revenue is expected to rise 12.1% YoY and net profit by 15.3% YoY in Q2 2024. Management sees sequential margin growth across divisions.
• Q2 growth is expected to be driven by SLB’s International segment, offsetting North American weakness. The International segment contributed 82% of Q1 revenue.
• SLB announced plans to increase shareholder returns from USD 2.5 billion to USD 3 billion in 2024 and to USD 4 billion in 2025.

• Mercari’s US operations, responsible for major losses, saw a workforce reduction by 45%, potentially preceding a market exit to improve overall margins.
• Fintech growth is strong, with Mercari issuing over 3 million credit cards, achieving a 67% YoY credit balance increase, despite current operational losses
• Mercari Hallo, an on-demand work platform, has rapidly gained users and business partners, positioning it to capitalize on Japan’s growing gig economy.

• Micron Technology recently provided insights into their fiscal third quarter 2024 performance, shedding light on various strategic and operational aspects that investors may find critical in shaping their investment thesis.
• Amid a challenging global semiconductor landscape characterized by rapid technological advancements and fluctuating demand cycles, Micron appears cautiously optimistic about the future, driven by strategic investments and a focus on high-margin products.
• Baptista Research looks to evaluate the different factors that could influence the company’s price in the near future and attempts to carry out an independent valuation of the company using a Discounted Cash Flow (DCF) methodology.

• EC Healthcare (2138 HK) reported muted FY24 result. While revenue increased 9% YoY to a record high of HK$4.2B, EBITDA and net profit declined 10% and 85%, YoY, respectively.
• The reopening of borders saw a slower-than-anticipated recovery in revenue from Chinese Mainland medical tourism. The prevailing high interest rate, inflationary pressure, and economic uncertainties have made the operations challenging.
• EC Healthcare shares plunged ~70% over the last one year. Although the company has long-term growth drivers and margin levers, there is short-term uncertainties over financial performance improvement.

• CarMax has reported its fiscal 2025 first quarter results, revealing a mixed financial scenario.
• This analysis aims to objectively evaluate the performance by weighing the key positives and negatives reflected in the data and future company outlook.
• Starting with the positives, CarMax noted several encouraging business trends, such as a stabilization in vehicle values and a decrease in average vehicle selling prices, which fell by approximately $700 per unit.

• NetDragon’s stock is priced at 11.0 HKD with 531 million shares and a market cap of 5,870 HKD
• Company completed a reverse merger listing for its education business, causing some complications, but gaming business is seen as a hidden gem with growth potential
• NetDragon, operated by the Liu family, has a history of successful business incubation and has returned around 50% of its market capitalization to shareholders in the past three years

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only. This article was originally published 3 months ago on Value Investors Club.