RHB Group Research analyst Jarick Seet sees HRNetGroup’s $30 million share buyback programme as strongly positive for its share price, as the company continues to benefit from a strong rebound in recruitment demand.
Seet notes that the maximum number of shares HRnet can buy is 100.38 million, equivalent to 10% of issued capital. Depending on the prices at which shares are purchased, the programme could take over a year to complete.
“That said, we believe this signals strong conviction from management, which views its stock as undervalued. Note that management is also very upbeat on the company’s growth prospects,” adds Seet.
Meanwhile, Maybank Securities’ analyst Eric Ong sees HRnet as a beneficiary of the current tight labour market, as Singapore eases its border restrictions and reopens the economy. In particular, Maybank expects the professional recruitment segment to drive HRnet’s core EPS growth in FY2022, along with rising wages and placement volumes, while the flexible staffing business should continue to do “reasonably well”.
A 5%-14% pay rise for civil servants scheduled for Aug 2022 could have a knock-on effect on private sector salaries, says Ong. According to his channel checks, there is a widespread talent shortage, especially in IT and life sciences, which accounts for 15% and 26% of HRnet’s FY2021 revenue.
“As the group’s fees are based on a percentage of salaries offered to successful candidates, HRnet will be able to ride on this increase in salary levels across geographies. This may potentially provide some upside surprise to our professional recruitment revenue forecast,” says Ong.
HRnet had recently secured a two-year contract from 2022 to 2024 for the recruitment of administrative and ancillary positions for Singapore General Hospital. Notwithstanding the recovering economy, external macro risks remain and demand for flexible staffing should stay firm, in Maybank’s view.
“This is because some organisations such as SMEs may wish to obtain workers on a needs basis, instead of carrying permanent headcount that adds to their rising operating expenses amid the inflationary environment,” Ong says.
As HRnet is likely to chart another solid performance this year, Seet expects the company to continue rewarding shareholders with attractive dividends. RHB estimates it to pay out 60% of earnings as dividends, translating to a yield of about 6% this year.
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“Management remains bullish on both its recruitment segments across all geographical areas, and still sees strong demand for its services in the future. As such, we expect its margins to continue growing as well.
“This counter is trading at 10.6x FY2022 P/E, which is lower than its global peer average. We believe HRnet is a decent proxy to the global economic recovery, and is well-poised to chalk solid FY2022 results,”
Both Seet and Ong maintain their “buy” calls on HRnet with a target price of $1.01 and $1.07 respectively.
As at 11.09am, shares in HRnet are trading 0.5 cents higher or 0.65% up at 77 cents.
