In today’s briefing:
- CMIC (2309 JP) – Huge Business Model Plan Appears to Hide Assets, Then an MBO. Ugh…
- Recruit 2Q: Earnings Further Slows Down; 2H To Be Even More Challenging
- Skylark Holdings: Anticipating Another Significant Guidance Upgrade
- Deep-Dive Review – Simplex Holdings (4373 JP)
CMIC (2309 JP) – Huge Business Model Plan Appears to Hide Assets, Then an MBO. Ugh…
- CMIC Holdings (2309 JP) decided to “change its business model” this past spring, transferring control of a consolidated JV and other subs to DNP.
- The result changed the accounting, and the business model, capitalising future cashflow and net income in a “hidden” asset which may or may not be in the Financial Advisor’s valuation.
- My read is this is being done too cheaply, and the price should be 30-60% higher. But, it would be tough to block this.
Recruit 2Q: Earnings Further Slows Down; 2H To Be Even More Challenging
- 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.
Skylark Holdings: Anticipating Another Significant Guidance Upgrade
- If Skylark Co Ltd (3197 JP)‘s pricing and footfall growth trend persists, it’s likely the company and consensus will revise annual revenue targets upward.
- The OP is also expected to exceed Q3 estimates with an OP of ¥7.9bn, prompting a necessary upgrade of annual guidance by ¥5.0-6.0bn.
- Yet, we’ll approach Skylark’s earnings trade cautiously, considering its current valuation.
Deep-Dive Review – Simplex Holdings (4373 JP)
- Presenting a clear growth roadmap – following disclosure of the new medium-term business plan (‘MTBP2027’ covering FY3/2025 to FY3/2027) and long-term growth strategy (‘Vision1000’ depicting timing around 2030), we have revised our earnings estimates for FY3/2025 and FY3/2026.
- These reflect 1) acquisitive growth impact towards FY3/2027 as capital is allocated to the fast-growing Strategy/DX Consulting business, and 2) stronger margin growth driven by productivity enhancements and improving sales mix.
- We believe diversifying into new market sectors will open new growth opportunities and develop a more resilient business.
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