In light of HRnetGroup’s strong rebound in FY2021, analysts from CGS-CIMB Research and RHB Group Research are optimistic on the group’s growth and staff expansion moving into FY2022.
For 1HFY2021, HRnetGroup reported that its revenue and PATMI grew by 30.8% and 71.2% y-o-y to $275 million and $35.9 million.
The counter is also trading at 13.3 times FY2021 price-to-earnings (P/E), according to RHB’s estimates. According to the analysts, the group is currently trading lower than its global peer average.
See: CGS-CIMB sees higher wage growth and volumes to drive HRnetGroup's gross profits in FY21-22
On this, CGS-CIMB Research analysts Kenneth Tan and Lim Siew Khee are keeping their “add” call on HRnetGroup with an unchanged target price of $1.15.
The target price is based on 17 times FY2022 P/E (+1 standard deviation from 4-year historical mean in view of the positive labour market recovery).
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HRnetGroup currently trades at [around] 12 times FY22F P/E (or -0.5 standard deviation from 4-year historical mean).
CGS’s Tan and Lim noted that the group is seeing good momentum for its flexible staffing segment, with both volumes and bill rates looking strong presently.
“HRnetGroup’s professional recruitment segment is steadily recovering, with both volumes and gross profit (GP) per placement gradually increasing,” say Tan and Lim.
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Heading into FY2022, the analysts say that the group expects its permanent placement volumes to gain traction as borders reopen and organisations ramp up their bench strength. “Companies would also need to rehire to replace employees who were retrenched or left during the pandemic,” say the analysts.
This is consistent with the overall upbeat hiring sentiment in Singapore, where notable sectors seeing hiring demand include technology, FMCG, finance, and healthcare.
Additionally, given the group’s net cash position as at end-1H2021, the analysts noted that HRnetGroup is open to M&A opportunities. “Potential areas highlighted include social recruiting companies and companies in the professional recruitment space,” they say.
RHB analyst Jarick Seet has also maintained a “buy” rating on HRnetGroup with an increased target price by 13% to 93 cents with a dividend yield of 4.5% for the FY2021.
On 19 Nov, HRnetGroup announced a special dividend per share of 1 cent, which signals a potential change in the group’s mindset on rewarding shareholders.
Seet observes that this could be a signal that its dividend payout ratio may increase ahead, compared with the 50% since its IPO. “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 dividends for FY2021 to be higher than that of FY2020, which should result in a 4.5% yield for FY2021,” he says.
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As an efficiently run company compared to its global peers, HRnetGroup is a decent proxy to the global economic recovery, and is set to enjoy a stellar FY2021, according to the analyst. This comes after RHB Group Research derived HRnetGroup’s ESG score of 3.0 from 3.1, which is close to the 3.0 median score for our Singapore coverage universe.
Analysts posit that key downside risks include dampened hiring sentiment from deteriorating macro conditions and an economic recession.
At 4.55pm, shares in HRnetGroup are trading at 1.22% down or 1 cent lower at 81 cents.
