SINGAPORE (Jan 9): RHB expects HRnetGroup to end FY17 with a bang given the group recorded positive 3Q17 results, reflecting strong growth from its flexible staffing business in Singapore as well as the full contribution from the 88GLOW plan.
In a Tuesday report, analyst Jarick Seet says, “We expect strong growth in flexible staffing to continue in 4Q17, due to major events like Christmas and the New Year.”
With a net cash hoard of $280 million, along with $15-20 million of free cash flow per year and low capex requirements, the analyst believes that the group is ready for an acquisition spree.
The group recently entered into a joint venture (JV) with Indonesian recruitment agency PT Rimbun Job Agency to establish a new brand, HRnet Rimbun that will acquire Rimbun Job Agency’s existing professional recruitment business and provide recruitment services in Jakarta.
However, the consideration has yet to be finalised and the acquisition is expected to be completed by 1Q18.
HRnetGroup’s management has also showed interest in growing inorganically through acquisitions, especially in other parts of the world. Thus far, several non-disclosure agreements (NDA) has already been signed.
“We believe HRnetgroup is likely to target recruitment firms that specialise in specific sectors – this would further add an edge and niche to its existing profile. Management has already started with Rimbun Job Agency, and we think that there would be larger-sized acquisitions to come, especially in 1Q18-2Q18,” says Seet.
Seet believes that the group is likely to focus on making acquisitions in new markets that have yet to be entrenched in, including Japan, China, Australia and Europe.
RHB is maintaining its “buy” call on HRnetGroup with a target price of $1.14.
As at 11.34am, the stock is trading at 82 cents or 17.3 times FY18 earnings with a dividend yield of 2.9%.
