SINGAPORE (Mar 4): It is 8.30am, and Adeline Sim, executive director of HRnetGroup, and her colleagues are gathered in the lobby of their office for a 20-minute daily exercise-and-meditation qigong routine, which helps keep the staff happy and healthy.
This morning routine is not HRnetGroup’s only unique practice. Companywide internal meetings are held on Saturdays, something that is avoided by most firms on a five-day work week. Besides fostering camaraderie, there is a practical reason for doing so. “Mondays to Fridays are the golden time for us to meet clients and call [job] candidates,” explains Sim, who has been running the company since 2003.
Such practices have helped HRnetGroup expand to 30 entities worldwide, including in Malaysia, Thailand, Indonesia, China, Hong Kong, Taiwan, Japan and South Korea. It is the largest Asia-based recruitment agency in Asia-Pacific (excluding Japan). Its brands include HRNetOne, Recruit Express, PeopleSearch and RecruitFirst.
Last year, HRnetGroup, which listed 18 months ago, was able to continue growing. It expanded into new markets, including Jakarta, Shanghai, Guangzhou, Suzhou and Hong Kong. It is operating in Jakarta under HRnetRimbun, in mainland China under REForce and in Hong Kong under Career Personnel.
HRnetGroup might have a certain heft, but Sim is on a constant lookout for established local partners to work with whenever the company moves into a new market. She says, “As much as we talk about everyone being global citizens, we must admit that it is not the same as being a local in a country. As a local, you have better knowledge of the types of jobs and industries people like to work in, and this is exactly the kind of knowledge that a recruiter needs to have to make a difference.”
For the year ended Dec 31, 2018, the company posted record earnings of $48.2 million, up 16.6% y-o-y. Revenue rose 9.3% y-o-y to $428.5 million. Besides organic growth, three acquisitions in new markets helped as well, bringing in an additional $2.9 million in gross profit and $4.4 million in revenue.
Expanding global reach
Having made inroads into new markets, the company aims to deepen and broaden its presence in these markets. For example, RecruitFirst Malaysia will commence operations in the first quarter of this year, and RecruitFirst Shanghai, in the second quarter. HRnet One, another brand, will start in Shenzhen in the following quarter.
China, with its vast opportunities, is an obvious target market. In FY2018, China was one of HRnetGroup’s fastest-growing markets, with earnings up 50% y-o-y, albeit from a low base. “In areas where there is high demand, employers are prepared to pay much better than anything you would see [in Singapore],” Sim tells The Edge Singapore.
“If [they] really want this person who’s good at new energy or digital marketing, there’s that willingness to pay for what they want. Because of the speed at which everything is moving, they don’t want to wait; they want it now.”
Sim is feeling upbeat even though headline numbers are pointing towards the Chinese economy’s slowing and the employment market is no longer as hot as before. Data from the World Bank shows the Labour Force Participation Rate in China dropping from 69.4% in December 2016 to 68.9% in December 2017. As at September 2018, the unemployment rate stood at 3.8%. Sim believes HRnetGroup will enjoy strong demand for its services, as employers are always eager to hire the “right candidate”.
Separately, the group’s stronger presence in Malaysia comes amid a slowing economy and softer job market. The Malaysian Employers Federation (MEF) anticipates that employers are likely to retrench workers and refrain from hiring new ones this year, in a bid to cut costs.
This arises as companies increasingly turn to automation to perform their operations. It also follows the government’s decision to raise the minimum monthly wage from RM1,000 ($331) to RM1,050 from Jan 1, 2019 and to place foreign workers under the protection of the Social Security Organisation. Thus, MEF expects companies to reduce costs by employing fewer workers.
Vietnam, with its relatively young labour force and economic reforms driving growth, is another market that interests Sim. Within Asean, it is an obvious growth market.
Farther afield, she is eyeing markets such as the UK and Australia, even though both are relatively mature. The UK, for example, faces high levels of unemployment made worse by the Brexit uncertainties. This has the effect of giving hirers a greater range of choices.
More importantly, by expanding into these markets, HRnetGroup can gain greater credibility as a regional player. For example, the company will be able to help multinational clients hire across various locations in which HRnetGroup has a presence. “Having that regional delivery capability is very important. That’s really our big draw,” says Sim.
Higher dividend
HRnetGroup went public at 90 cents in June 2017. Its share price reached as high as 92.5 cents that month. It closed on Feb 28 at 79 cents, down 1.25% year to date, implying a market value of $795 million and valuation of 16.6 times historical earnings and 14.11 times forward earnings.
The company suffered hiccups along the way. In the last quarter, it had to write off $1.6 million; the bulk of it, some $1.3 million, was attributed to a bike-sharing venture and the remaining was because of a start-up in Hong Kong. The company has since imposed tighter credit policies and will now give clients a maximum credit of $0.1 million. It hopes to weed out less creditworthy clients by doing so.
Nevertheless, with growing overseas prospects, analysts covering this stock are generally upbeat on it. RHB, for example, is optimistic that new markets such as Vietnam will be earnings-accretive for HRnetGroup. Besides RHB, there are four other brokerages with active coverage on the stock. While they all recommend investors to buy, their price targets range between $1.03 and $1.08.
HRnetGroup will be paying a final dividend of 2.8 cents a share for FY2018, which is nearly 59% of its earnings per share of 4.77 cents. For FY2017, the company paid out 2.3 cents from an EPS of 4.59 cents.
This story appears in The Edge Singapore (Issue 871, week of Mar 4) which is on sale now. Subscribe here
