SINGAPORE (Feb 15): RHB Research is keeping its “buy” call on HRnetGroup with an unchanged target price of $1.14, even as the recruitment firm continues its acquisition spree.
This comes after HRnetGroup entered into a binding conditional agreement with Glints Intern, a platform for graduate and young professionals in Asia, for a strategic stake of $0.5 million.
“Management sees synergies between the two firms, which would provide HRnetGroup with an avenue to stay ahead of the curve in the competitive digital human resources (HR) space,” says analyst Jarick Seet in a Wednesday report.
“[HRnetGroup] would also gain strategic input from [Glints’] successful operational experience across 10 Asian cities,” he adds.
The acquisition of a stake in Glints follows HRnetGroup’s agreement to acquire 51% of the shares in REForce (Shanghai) Human Resources Management Consulting Co as it bids to expand its core business of recruitment services into China.
See: HRnetGroup expanding into China with Shanghai acquisition
According to Seet, HRnetGroup’s management has expressed interest in growing inorganically through acquisitions, especially in other parts of the world.
“With a net cash hoard of $280 million – coupled with $15-20 million in FCFs (free cash flows) per annum and low capex requirements – we believe HRnetGroup is well positioned to go on an acquisition spree,” Seet says.
“We believe HRnetGroup is likely to increase its acquisitions in the near future and focus on new markets it has yet to penetrate into, [such as] Japan, China, Australia and Europe,” he adds.
On top of the accretive acquisitions that are incoming, Seet also expects HRnetGroup to see a better 4Q ahead, on the back of stronger growth in flexible staffing in Singapore.
Shares of HRnetGroup last closed at 81 cents on Wednesday. According to RHB valuations, this implies an estimated price-to-earnings ratio of 18.9 times and a dividend yield of 2.5% for FY17.
