HRNETGROUP LIMITED (SGX:CHZ)
HRnetGroup - Labour Market Showing Strength In 1Q21
- Singapore’s labour market continued on its recovery mode in 1Q21: unemployment rate at 4% (-0.5% points y-o-y); retrenchments down 28% y-o-y.
- HRnetGroup (SGX:CHZ) has at least ~51% revenue exposure to sectors that were hiring.
- We reiterate our ADD call on HRnetGroup with a target price of S$0.82, as labour markets continue to strengthen, leading to more job creation and hiring activities.
Continued recovery for Singapore’s labour market in 1Q21
- We provide a follow up to our previous note HRnetGroup - CGS-CIMB Research 2021-06-08: Hiring Season Around The Corner with Singapore (55% of FY20 gross profit) reporting a positive set of labour market data, in our view, in its “Labour Market Report First Quarter 2021” released by the Ministry of Manpower on 17 Jun 2021.
- Resident unemployment rates continued to improve to 4% (-0.5% points y-o-y) and the change in total employment turned positive at +12,200 (1Q20: -25,800) for the first time after four consecutive quarters of decline, supported by resident employment growth in 1Q21.
- Total permanent employee retrenchments also declined 28% y-o-y to 2,190 in 1Q21 (1Q20: 3,040).
- We think that permanent placement volumes (~100% GPM) could be at a turning point, backed by a strengthening labour market supporting margin expansion for FY21F.
More jobs in the market; recruitment levels continue to rise
- In 1Q21, the ratio of job vacancies to unemployed persons grew strongly to 0.96 (4Q20: 0.75; 1Q20: 0.66), which implies that there is almost one job vacancy for every unemployed person in Singapore. Similarly, recruitment rates continue to strengthen to 1.9% (4Q20: 1.7%; 1Q20: 2.0%).
- In our view, we think to drive earnings growth.
Large exposure to sectors leading employment growth
- Sectors that led total employment growth for Singapore in 1Q21 were
- health and social services,
- public administration and education,
- food and beverage,
- administrative and support services,
- information and communications, and
- professional services.
- We estimate that HRnetGroup has a total revenue exposure of at least ~51% to these sectors which will continue to be a beneficiary for FY21F, in our view.
Reiterate ADD call on HRnetGroup with an unchanged target price of S$0.82
- We reiterate our ADD call on HRnetGroup with a target price of S$0.82, based on 14.0x FY22F P/E (5-year historical mean).
- See
- We like HRnetGroup as we believe that the company is a key downside risk is deteriorating macro conditions dampening hiring sentiment.
Darren ONG
CGS-CIMB Research
|
LIM Siew Khee
CGS-CIMB Research
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https://www.cgs-cimb.com
2021-06-22
SGX Stock
Analyst Report
0.821
SAME
0.821
