RHB Group Research is reiterating its “buy” call on HRNetGroup with a target price of $1.01, as analyst Jerick Seet believes it to be a beneficiary of the recovering economy.
As most countries worldwide, including Singapore, are treating Covid-19 as an endemic and opening up its borders for tourism, Seet expects hiring sentiment to pick up, especially in sectors such as tourism, entertainment, consumer and the service industry.
With that, HRNetGroup stands to benefit from the rebound in recruitment activity and jobs growth. Seet also expects professional and flexible staffing to further improve in FY2022 ending December.
To recap, FY2021 was a great year for the group as its performance exceeded pre-pandemic (FY2019) results, with revenue and Patmi up 36.4% and 39.7% y-o-y, respectively. Gross profit margin also increased to 39.4% from 31.9% a year ago.
See: HRnetGroup delivers record earnings for FY2021
While the group dished out a final dividend of 3 cents and a special dividend of 1 cent in FY2021, Seet expects management to continue rewarding shareholders with attractive dividends on the back of continued strong performance. Hence, he is forecasting a 5.4% dividend yield for FY2022 using a 60% payout ratio.
Meanwhile, Seet is upbeat on HRNetGRoup’s ongoing partnership with the Ministry of Education (MOE) since 2018.
See: HRnetGroup signs 4-year contract with MOE
Most recently, on Mar 30, the group’s subsidiary RecruitFirst successfully secured a further four-year contract from 2022 to 2025 to run MOE’s Focus Language Assistance in Reading programme (FLAiR Programme).
See also: RHB still upbeat on ST Engineering but trims target price by 2.3%
The FLAiR Programme provides language assistance to children in Kindergarten 2 at up to 400 pre-school centres across Singapore. The lessons are conducted by contractors deployed by RecruitFirst and benefit up to 4,000 children each year. RecruitFirst has partnered with MOE on the FLAiR programme since 2018 and will continue managing the operations and the execution of the programme.
On the outlook, the group’s management remains bullish for both its recruitment segments across all geographical areas and sees a strong demand for its services YTD.
“As a result, we conclude that such strong performance will continue and the company will benefit from higher margins as well. HRNetGroup has been an efficiently run company compared to its global peers – many of these were running at a loss during this tough period,” says Seet, while noting that the counter is trading at 11x FY2022 P/E, which is lower than global peers’ average.
As at 2.25pm, shares in HRNetGroup are trading 0.6% higher at 81 cents or 2.0x FY2022 book with a dividend yield of 5.4%.
Photo: The Edge Singapore/ Albert Chua
