HRNETGROUP LIMITED (SGX:CHZ)
HRnetGroup - Economic Recovery Play; Maintain BUY
- Maintain BUY with a Target Price of S$0.52, 8% upside and c.4% yield.
- With global economies reopening, more flight routes reinstated over time, and positive test results on a potential vaccine, chances for an economic rebound seem credible in 2021. Hiring may likely bottom this year and rebound in 2H21. We think the majority of bad news relating to HRnetGroup (SGX:CHZ) has been priced in.
Negative news mostly priced in.
- With COVID-19 effectively affecting HRnetGroup negatively, professional staffing, which yields the highest margins, dropped 27% y-o-y for 1H20 and resulted in lower gross margin. This is likely to continue till 1H21F but we think that most of the negative news and negative outlook has already been priced in and HRnetGroup Share Price has likely bottomed unless the situation continues to worsen globally.
3.8% dividend yield for FY20F.
- HRnetGroup announced 2.8 cents dividend for FY19, in line with our forecasts and represents about 55.8% of its PATMI. With its net cash balance sheet and strong cash flow generation despite a tough outlook and poorer performance, we expect HRnetGroup's FY20F dividend yield of 3.8% – decent, albeit, lower.
Hiring correlated to GDP performance.
- A country’s GDP growth is a key indicator on how it has performed economically. Singapore’s GDP growth fell in 2020 and is expected to be impacted in 1H21. We think that the world has now adjusted to COVID-19 and global economies should likely bottom by 1H21.
- In addition, positive news of vaccine trials may potentially lead to an effective vaccine, which will be positive for a global economic rebound and lead to more jobs and further hiring.
Net cash represents 60% of market cap.
- HRnetGroup is an efficiently run company as compared to its global peers, many of whom are operating at losses during this tough period. The company is still generating positive cash flow and has S$286m of net cash on its balance sheet as at 1H20, representing 60% of its market cap. It is also trading at a modest 12x FY21F P/E and a decent yield of 3.8%. We think that it has reached an attractive price level to accumulate for the longer term. Maintain BUY.
- See HRnet Group Share Price; HRnet Group Target Price; HRnet Group Analyst Reports; HRnet Group Dividend History; HRnet Group Announcements; HRnet Group Latest News.
- Key risks : Economic recession/
Jarick Seet
RHB Securities Research
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https://www.rhbinvest.com.sg/
2020-10-29
SGX Stock
Analyst Report
0.520
SAME
0.520
