HRnetGroup - Maybank Research 2022-08-12: Positive Dynamics

HRNETGROUP LIMITED (SGX:CHZ)

HRnetGroup - Positive Dynamics

HRnetGroup (SGX:CHZ)'s 1H22 underlying NPAT (excluding P&L impact of investments in mainly HR marketable securities) jumped 36% y-o-y to S$42.6m, driven by robust operating performance of both flexible staffing (FS) and professional recruitment (PR) in its key markets.

Overall, HRnetGroup's 1H22 net profit was in line with market expectations and our FY22-24E EPS forecasts are largely unchanged.
HRnetGroup declared a maiden interim dividend of S$0.0213, representing 50% of its core earnings. Maintain BUY recommendation on HRnetGroup with target price of S$1.07 as we roll forward our valuation and based on 15x FY23E P/E.

Professional Recruitment (PR) segment revenue grew 18.6% to S$52.2m along with higher remuneration packages across the board even as placement volumes stayed flattish at 3,691 (1H21: 3,734). We note that contribution from the financial services sector rose from 14% to 18% as its European and Asian banking clients expanded their manpower needs in Singapore.
Meanwhile, Flexible Staffing (FS) segment turnover rose 13.2% y-o-y to S$259.8m as average monthly contractor volume increased by 12% to 17,954 with the deployment of workers to travel-related and consumer-facing sectors following the relaxation of borders.

1H22 blended gross profit margin was 29.3% (1H21: 29.7%) with the Professional Recruitment (PR) and Flexible Staffing (FS) business mix at 16.6 and 82.7% respectively. (1H21: 16% vs 83.5%). While gross profit margin for Professional Recruitment (PR) segment was maintained at 99.5%, Flexible Staffing (FS) segment gross profit margin narrowed by 1.4ppt to 14.7% as some high-volume projects were delivered to quickly establish its footprint in Taiwan and Indonesia.
On a geographical basis, revenue from North Asia continued to increase by 28.4% y-o-y, and accounted for ~30% (+4ppt) of HRnetGroup's 1H22 topline.
Notably, revenue growth in China and Taiwan was 25.2% and 19.3%, boosted by its specialization in the semiconductor industry.

Backed by its asset-light model, HRnetGroup generated strong operating cashflow of S$54m in 1H22 before deploying S$20m for its working capital requirements, especially Flexible Staffing (FS) segment. This boosted its net cash position to S$312.7m with zero bank borrowings, thus shielding HRnetGroup from the rising interest rate environment.
See
Under its S$30m share buyback (SBB) program, HRnetGroup has purchased 1.5m shares in the open market at an average price of S$0.78 from 13 Jun to 8 Jul 2022 (before blackout period for earnings announcement). See summary on the latest share buybacks by SGX listed companies.

Eric Ong Maybank Research | https://www.maybank-ke.com.sg/ 2022-08-12

SGX Stock Analyst Report BUY MAINTAIN BUY 1.070 SAME 1.070