HRnetgroup - RHB Invest 2018-02-14: Acquisition Spree Continues – Glints

HRnetgroup - RHB Invest 2018-02-14: Acquisition Spree Continues – Glints HRNETGROUP LIMITED CHZ.SI

HRnetgroup - Acquisition Spree Continues – Glints

  • HRnetgroup has entered into a binding conditional agreement with Glints – a platform for graduate and young professionals in Asia – for a strategic stake for SGD0.5m. 
  • Management sees synergies between the two parties, which would provide HRnetgroup with an avenue to stay ahead of the curve in the competitive digital HR space. With SGD200m budgeted for M&As, we think that there are likely to be more acquisitions ahead, which would bump up its NPAT. 
  • With a positive 4Q17 due to Christmas and the New Year, maintain BUY and SGD1.14 Target Price (41% upside).



Strategic acquisition for the future – Glints Intern Pte Ltd (Glints).

  • HRnetgroup has entered into a binding conditional agreement with Glints – a platform for graduate and young professionals in Asia – that sees the former acquire a strategic stake in the latter for SGD0.5m. 
  • Management sees synergies between the two firms, which would provide HRnetgroup with an avenue to stay ahead of the curve in the competitive digital human resources (HR) space. It would also gain strategic input from its successful operational experience across 10 Asian cities. 
  • Glints last raised a USD2m Series A round co-led by Golden Equator Capital and Gobi Partners in 2016. Since its inception in 2014, the firm has focused on millennials and, today, owns the young professionals space with 300,000 candidates across Singapore and Jakarta.


JV with REForce (Shanghai) Human Resources Management Consulting Co (REForce). 

  • HRnetgroup announced on 11 Jan that it had entered into a binding term sheet to set up a JV in China. The group is acquiring a 51% stake in REForce and its relevant assets and affiliates in cash, comprising three components based on a tiered price-earnings multiple of REForce’s actual net profit as agreed between the parties. This has not been disclosed yet. 
  • We are positive on this acquisition, as it would hasten the expansion of its footprint in China.


Ready for acquisition spree with SGD280m net cash. 

  • With a net cash hoard of SGD280m – coupled with SGD15-20m in FCFs pa and low capex requirements – we believe HRnetgroup is well positioned to go on an acquisition spree. 
  • Management has expressed interest in growing inorganically through acquisitions, especially in other parts of the world. To this extent, several non-disclosure agreements have already been signed. We believe the group is likely to target recruitment firms that specialise in specific sectors – this would further add an edge and niche to its existing profile. 
  • Management has already started with Rimbun Job Agency, and we think that there would be larger-sized acquisitions to come, especially in 2Q18-3Q18.


Positive signs point towards a good 4Q17 and more incoming accretive acquisitions – maintain BUY. 

  • We believe HRnetgroup is likely to increase its acquisitions in the near future and focus on new markets it has yet to penetrate into, eg Japan, China, Australia and Europe. We also expect a better 4Q17 on stronger growth in flexible staffing in Singapore. 
  • With a positive outlook ahead, we maintain our BUY call and SGD1.14 Target Price (41% upside). 
  • Key risks include increased competition and fluctuations in general economic activity.




Jarick Seet RHB Invest | http://www.rhbinvest.com.sg/ 2018-02-14
RHB Invest SGX Stock Analyst Report BUY Maintain BUY 1.140 Same 1.140



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