HRnetGroup - RHB Invest 2021-07-22: Returning To Pre-pandemic Levels; Keep BUY


HRnetGroup - Returning To Pre-pandemic Levels; Keep BUY

  • HRnetGroup is set to benefit significantly from the strong rebound in recruitment and jobs. We expect professional and flexible staffing to rebound to levels stronger what we initially anticipated for FY21.
  • We lift FY21-22F net profit by 29% and 15%, which boosts our target price to its present level. Our target price is also pegged to 15x FY21F P/E. Maintain BUY, new target price of S$0.93 from S$0.72, 16% upside.

Strong rebound in FY21F.

  • With COVID-19 negatively affecting HRnetGroup (SGX:CHZ)’s business, its professional staffing segment – which yields the highest margins – reported a 27% y-o-y decline in business for 1H20. This crimped its overall margin. The impact lingered in 2H20, but we do think that most of the negative news and downbeat outlook has already been priced in.
  • As economic growth has picked up, and with the pace of recruitment ramping up strongly, earnings should rebound in 1H21F. As such, we expect its upcoming results to show solid numbers.
  • In the meantime, we expect both its flexible and professional staffing divisions to show strong double-digit recoveries from FY20 levels. HRnetGroup’s FY21F performance may likely even exceed its pre-pandemic (ie FY19) results.
  • HRnetGroup’s flexible staffing business received a major boost from from governments, as there was increased demand for manpower needed to work at vaccination and swab-testing centres. Its professional recruitment business rebounded on higher salaries paid – as companies now require more niche workers to fit the roles or profiles they are looking for, and are willing to pay higher to secure such talent.

FY21F dividend yield of ~3.9%.

  • HRnet Group announced a dividend of S$0.025 per share for FY20, which is in line with our forecast. With its net cash balance sheet and strong cash flow generation, on top of a brighter outlook and the expectation of improved results ahead, we expect HRnetGroup's dividends for FY21 to be higher than that of FY20 which will result in a 3.9% yield for FY2F

Net cash pile equivalent to 55% of its market cap.

Jarick Seet RHB Securities Research | https://www.rhbinvest.com.sg/ 2021-07-22
SGX Stock Analyst Report BUY MAINTAIN BUY 0.93 UP 0.720