Deep-dive 2021-11: En-Japan

En-Japan (4849 JP) is a Japanese online recruitment company.

It owns a large and growing platform for job advertisements, with a user-generated company review system that is the strongest in Japan by a factor of 10x. What makes the company stand out is its Amazon-like focus on doing what’s right for the user - seeking long-term satisfaction not just for their corporate clients but also for job seekers.

The take-rate for Japanese recruitment companies tends to be high (up to 1/3 of a yearly salary). On the other hand, the average Japanese switches jobs only 1/10 as often as the average American. This disparity will probably narrow over time. Also, En-Japan’s user base is comprised of young professionals. The company will most likely be able to grow with its users as they age and achieve higher income.

En-Japan’s new Engage platform is demonstrably a quality asset. Similar to what Shopify has managed to achieve in e-commerce, Engage enables En-Japan to “sit on the client” and dominate the market in an era of distributed job boards.

The Japanese job market was hurt by COVID-19 but has now started to recover. Japan’s ongoing vaccination program will accelerate this process. Full inoculation of the population is expected in early 2022. Management commentary is becoming increasingly positive. And there are clear precedents: job markets in the US and Australia now actually have more overall job postings than before the pandemic.

Underlying growth in the domestic job board segment, recovery from COVID-19 and monetisation of the Engage platform is likely to bring operating profit close to JPY 20 billion by FY2025 - in line with sell-side consensus numbers - which assuming an EV/EBIT of 12x would imply a theoretical upside to intrinsic value of +68%.

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