SINGAPORE (Nov 14): RHB Research is maintaining its “buy” call on HRnetgroup at an unchanged target price of $1.14 after the recruitment firm’s strong set of 3Q17 results, which reflected stronger flexible staffing in Singapore and its 88GLOW scheme taking effect.
See: HRnetGroup posts 20% rise in 3Q earnings to $10.7 mil
In a Tuesday report, analyst Jarick Seet says he expects the strong growth in flexible staffing to continue going into 4Q due to major events like Christmas and New Year, and hence support the group’s earnings in the quarter ahead.
The analyst reiterates his view that the group is well-positioned to embark on an acquisition spree in the near future, given its net cash hoard of $280 million, about $15-20 million of free cash flows a year, and low capex requirements.
See: Could HRnetgroup be embarking on an acquisition spree?
“We believe it would likely target recruitment firms that are specialised in a specific sector, which would further add an edge and niche to their existing profile. Management has already started with PT Rimbun Job and we think that there will be more, larger sized acquisitions to come, especially in 1Q18 and 2Q18,” says Seet.
“Assuming a budgeted SGD200m for acquisitions at an average P/E of 10 times, HRnetgroup could potentially add another $20 million (+50%) to its NPAT,” he adds.
As at 11.16am, shares in HRnetgroup are trading 0.6% lower at 88 cents, or 2.67 times FY18 book.
