SINGAPORE (Nov 13): RHB Research is keeping its “buy” call on HRnetGroup with an unchanged price target of $1.14 amid what could be the start of an acquisition spree backed by a $280 million war chest.
“We expect HRnetgroup’s new JV (with PT Rimbun Job Agency) to be accretive to earnings, also providing synergies and allowing them to tap into Indonesia’s pool of jobseekers and employers,” says analyst Jarick Seet in a report on Nov 10.
“We believe this could also signal to the market that they are starting their acquisition spree, with $280 million net cash available that could further fuel their NPAT growth without any dilution,” he adds.
HRnetGroup on Monday reported a 20.2% rise in earnings for the 3Q ended September to $10.7 million on the back of acquisitions under its 88GLOW scheme.
In a statement accompanying the results release, executive director Adeline Sim says the 10-year scheme will continue to give the group acquisition opportunities in the coming years.
See: HRnetGroup posts 20% rise in 3Q earnings to $10.7 mil
“Assuming a budgeted $200 million for acquisitions at an average P/E of 10x, HRnetGroup could potentially add another $20 million (or 50%) to its NPAT, which is significant,” says Seet.
In addition, Seet expects HRnetGroup to see better results in the second half of 2017 compared to 1H17, due to the full impact of the decrease in its minority interests to 6.4%, from over 18% previously.
As at 12.07pm, shares of HRnetGroup are trading 1.5 cents higher at 88 cents, implying an estimated price-to-earnings ratio of 20.1 times and a dividend yield of 2.3% in FY17.
