HRnetGroup - Phillip Securities 2022-03-02: Another Record Year Expected


HRnetGroup - Another Record Year Expected

  • Results beat our estimates. HRnetGroup (SGX:CHZ)'s FY21 revenue and PATMI was 114%/108% of our forecast. 2H21 PATMI grew 14% y-o-y to S$29.6mil. Excluding fair value losses, PATMI would have jumped 37%.
  • 2H21 growth was from both permanent recruitment (+36% y-o-y) and flexible staffing (+43% y-o-y). FY21 dividend increased 60% to S$0.04, including a S$0.01 special dividend.
  • We expect another record year for HRnetGroup in FY22e. Volume growth in permanent hires will come from recovering economic conditions and clients working more with recruiters due to the tight labour market. Rising salaries will be the driver for higher margins. Flexible staffing remains healthy as others sectors start to re-open. We maintain BUY.
  • Our target price for HRnetGroup is raised to S$1.18 (previous S$1.05) as we raise FY22e earnings forecast by 20%. The valuation metric is lowered from 14x to 12x P/E FY22e ex-cash. We tag to the mid-range of the historical 5-year range as the labour recovery has moved past the peak cycle.

The Positives

Growth in both segments.

  • Both permanent and flexible staffing segment enjoyed growth in 2H21. Permanent staffing recorded 16% volume growth at 4,034 placements and 16% improvement in margins per placement. Flexible staffing volumes grew an estimated 36% y-o-y.
  • Sectors that performed the best in 2H21 were healthcare (+182% y-o-y), manufacturing (+65%) and IT and Tech (+49%). Consumer (-1%) and financials (+7%) were the weak spots. Healthcare was driven by COVID-19 vaccinations and testing work in Singapore, while IT and tech hires came from North Asia.

Jump in dividends.

  • HRnetGroup's FY21 full-year dividend was raised 60% to S$0.04 (includes S$0.01 special). This represents a payout of S$40mil. Cash flow from operations of S$53mil and a net cash hoard of S$327mil will support the dividends. CAPEX for the year was a modest S$1.3mil.

The Negative

Volatility from investments.

  • There is S$30mil of listed equities and debt on HRnetGroup's balance sheet which will be marked to market. Changes in value will be reflected through the income statement. In 2H21 there was a S$2.4mil net fair value loss. In contrast, 2H20 saw a S$2.5mil gain. This swing in fair value will create some volatility in reported net earnings.


  • We expect another healthy year of growth in FY22e. Economies are recovering and vacancies are at record levels, especially in Singapore. Labour challenges haveled to companies working closer with recruiters. The pivot towards local hires is another demand driver for recruiters. North Asia demand is driven by semiconductors roles such as IC design and wafer fabs in Taiwan and China.
  • We expect growth in flexible hiring to soften as healthcare hires slow down. The pick up will come from sectors most affected by border closures such as retail and consumer.

Maintain BUY with a higher target price of $1.18 from S$1.05.

Paul Chew Phillip Securities Research | https://www.stocksbnb.com/ 2022-03-02
SGX Stock Analyst Report BUY MAINTAIN BUY 1.18 UP 1.050