HRnetGroup - Phillip Securities 2022-08-15: Faster Growth Outside Singapore


HRnetGroup - Faster Growth Outside Singapore

  • HRnetGroup (SGX:CHZ)'s Results were within expectations. 1H22 revenue and PATMI was 51%/48% of our FY22e forecast. 1H22 PATMI grew 12% y-o-y to S$32.6mil, excluding fair value losses and one-off reversal of trade accruals.
  • Revenue growth of 14% was from both permanent recruitment (+19% y-o-y) and flexible staffing (+13% y-o-y). Maiden interim dividend of S$0.03 per share was announced.
  • HRnetGroup's growth in 1H22 was a mixture of pricing and volumes driven by a 30% revenue growth in Rest of Asia. Expanding the franchise outside Singapore is a key growth driver. Rest of Asia is now 40% of revenue from 28% in FY20.
  • We maintain our FY22e forecast. Our BUY recommendation and target price of S$1.18 for HRnetGroup is maintained, according to 12x P/E FY22e ex-cash.
  • Flexible staffing demand is driven by new geographies and re-opening sectors. Permanent hiring is supported by the demand for unfilled job vacancies and an increase in full-time consultants.

The Positives

Strong growth outside Singapore.

  • HRnetGroup's revenue from Rest of Asia grew 30% to S$107.8mil. These regions now account for 40% of total revenue, a jump from the 26% in FY18. Revenue has grown in region from increasing the number co-owners to build the franchise and expanding into flexible staffing services.

Returning S$100mil cash, as it piles up.

  • Free cash flow generated in 1H22 was S$33.1m (1H21: S$3.5mil). HRnetGroup's net cash on the balance sheet is S$312.7mil (1H21: S$297.1mil).
  • HRnetGroup announced a maiden interim dividend of S$0.03 per share (S$30mil).
  • Together, with planned share buyback of S$30mil, FY22 final dividend of 3 cent (S$30mil) and special dividend of 1 cent (S$10mil), HRnetGroup is returning around S$100mil to shareholders this year.

The Negative

Weak equity market hurt book value.

  • In 1H22 there was a decline of S$12.6mil in financial assets, namely equity shares in listed recruitment companies. There was S$5.7mil loss recognised in the income statement and another S$6.9mil in the balance sheet.


  • Weaker economic conditions in the region may have a dampening effect on volume. In Singapore, we expect the high job vacancy rates and re-opening of borders to drive revenue growth. For instance, there has been a decline in COVID-19 related vaccination roles but replaced but other non-COVID medical needs as foreign tourist and elective procedures return. The sustainability of growth in North Asia can improve if lockdowns ease.
  • Another strength of HRnetGroup is the ability to veer into faster growing segments of the economy. Despite the slower economic growth and lockdown in North Asia in 1H22, revenues expanded 28% y-o-y in 1H22. HRnetGroup capitalized on the strong demand from semiconductor headcount by local and multinational companies

Maintain BUY recommendation on HRnetGroup

Paul Chew Phillip Securities Research | https://www.stocksbnb.com/ 2022-08-15
SGX Stock Analyst Report BUY MAINTAIN BUY 1.180 SAME 1.180