Daily Brief Japan: Toshiba Corp, Recruit Holdings, Tokyo Stock Exchange Tokyo Price Index Topix and more

In today’s briefing:

Toshiba – HDD Business Risk
Recruit: Further Drop in US Job Openings Adds Strain on HRTech Earnings
To Change a Company that Didn’t Change when Activist Investors Asked for Solutions to Their Issues

Toshiba – HDD Business Risk

We have been tracking Toshiba’s rapidly deteriorating HDD business over the last few quarters.
Recent trends raise further concerns about the long-term viability of the business.
In particular, visibility remains low on a strong recovery in demand and until that occurs the possibility of a YoY deterioration remains high.

US job openings in February fell to 9.9m, lowest since May 2021 and 0.5m below market expectations. The job openings are forecast to drop further in March 2023.
Recruit Holdings (6098 JP) ‘s 3QFY03/2023 profits declined significantly with labour markets returning to normalcy and we expect further drop in margins going forward.
HR Tech drives most of Recruit’s profits and we expect the company’s earnings to decline going forward with weakening of labour markets globally.

Now that percentage of foreign shareholders has reached 30%, other foreign shareholders are more likely to support activist investors’ proposals, and companies are paying more attention to communication with investors.
While cross-shareholdings held by banks etc. are declining, foreign shareholders and trust banks are on the rise. The holdings held by trust banks are managed by domestic institutional investors.
Whether their exercise of voting rights changes from the past will be the key to improving governance and moving forward with solutions to issues that have been postponed until now.

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