SINGAPORE (June 14): CGS-CIMB Research is keeping HRnetGroup at “add” but with a lower target price of $1.01 compared to $1.03 previously.
This came on the back of a survey released by ManpowerGroup, which showed that the net employment outlook for 3Q19 is relative stable, and expects a 12% growth for the next quarter, a 1 percentage point (pp) increase from the last quarter, but unchanged from the same period last year.
See: Hiring prospects in 3Q expected to remain stable: ManpowerGroup
Among the seven sectors in Singapore, public admin & education has the strongest hiring intentions at 22%, followed by services (+18%) and transportation & utilities (+10%).
This is in contrast to 1Q19, which saw employers in Singapore being more cautious with hiring, leading to the quarter’s gross profit declining by 11.6% y-o-y. This was partially mitigated by higher professional recruitment in North Asia.
See: Singapore indicates region's weakest hiring intentions for 1Q19: ManpowerGroup
In a Thursday report, analyst Ngoh Yi Sin says, “While HRNET continues to face softer demand from some multinational clients in China, it is actively pursuing new domestic customers, which could contribute more meaningfully from 3Q19F. We are also positive on its new overseas offices which have started to gain traction e.g. REForce, Career Personnel in Hong Kong, RecruitFirst in Shanghai and HK.”
For its latest 1Q19 earnings, HRnetGroup posted an 18.5% y-o-y increase in earnings to $19.3 million. This was despite a softer topline, which saw professional recruitment drop 1.5% y-o-y and flexible staffing decrease by 4.1% y-o-y.
“We expect flexible staffing to remain under pressure in 2Q19F due to the exit of some start-ups in Singapore; recovery in professional recruitment could be more visible from 3Q19F as HRNET secures more public sector jobs in Singapore,” adds Ngoh.
However, 1Q19 earnings may see a reversal as 1Q19 earnings was boosted by a one-off $5.6 million fair value gain on financial assets. There will also be zero government subsidies in the next quarter.
See: HRnetGroup sees 18.5% 1Q earnings growth to $19.3 mil despite softer topline
Meanwhile, the group in May had acquire a 7.85% stake in Hong Kong-based Bamboos Healthcare Holdings, a fast-growing healthcare staffing solutions provider for clients like hospitals and social service organisations, with a portfolio of around 20,000 healthcare professionals in HK.
“While healthcare life science sector accounted for approximately 10% of HRNET’s revenue in FY17- 18, Bamboos is not an existing customer and we see potential for further collaboration,” says Ngoh.
As at 2.25pm, shares in HRnetGroup are trading at 72 cents or 2.05 times FY19 book with a dividend yield of 3.57%.
