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


HRnetGroup - Positive Dynamics

HRnetGroup's 1H22 net in line; declares interim dividend

  • 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) - price driven versus Flexible Staffing (FS) – volume driven

  • 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.

Growth in North Asia continues to impress

  • 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.

Only utilised S$1.2m out of S$30m share buyback (SBB) program

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