On Mar 25, Simco acquired 4,204,300 shares of HRnetGroup HRnetGroup : CHZ 0% for a consideration of S$3,254,969, at 77.4 Singapore cents per share. This increased Simco' s direct interest in HRnetGroup from 77.61 per cent to 78.03 per cent, while increasing the deemed interests of founding chairman Peter Sim, executive director and chief executive officer of Recruit Express JS Sim, and executive director and chief legal officer Adeline Sim.

 

Peter Sim founded the company in 1992 and has more than 40 years of expertise in social work, human resource management, and talent acquisition.

 

HRnetGroup has since grown its business to over 900 consultants spread across 13 Asian cities.

 

On Feb 25, HRnetGroup reported that its FY21 (ended Dec 31) revenue increased 36.4 per cent from FY20, with net profit growing 41.1 per cent to S$70.3 million. This was another record-breaking year in revenue for the company with the S$590.5 million revenue in FY21, following S$433.0 million revenue in FY20 and S$423.1 million revenue in FY19.

 

The company added that revenue continues to be generated from diverse sources across multiple sectors and specialisations and it is not dependent on any single sector, with its top 10 clients contributing 26.6 per cent to its FY21 revenue.

 

In FY21, the company facilitated 7,794 permanent job placements while placing 54,448 unique contractor headcounts for the year.

 

Back on Dec 30, the board of directors of HRnetGroup announced that Adeline Sim had been appointed by the Minister for Education to the boards of SkillsFuture Singapore and of the Lifelong Learning Institute.

 

Effective Jan 1, Wallace Gao Yong was appointed as an independent director of HRnetGroup. He is based in Beijing and is the chairman at Beijing Career International, the first HR service enterprise that was listed on China' s A-share market.

RECRUITMENT firm HRnetGroup' s HRnetGroup: CHZ -1.84% net profit climbed 71.2 per cent to a fresh high of S$35.9 million for the six months ended June 30, from about S$21 million in the year-ago period.

 

Revenue for the first half rose 30.8 per cent to S$275.1 million, also a record high for the company, from S$210.3 million in the corresponding period last year.

 

Both the flexible staffing and professional recruitment segments posted a strong performance across HRnetGroup' s three key markets of Singapore, North Asia and rest of Asia.

 

In the flexible staffing business, the number of contractors surged 47.1 per cent year on year to an all-time high of 17,123 in June 2021, driving a 31.9 per cent boost in the segment' s revenue to S$229.6 million.

 

As for the professional recruitment arm, revenue was up by 25.1 per cent to S$44 million as HRnetGroup placed 3,760 talents, with an increase of 215 in permanent jobs.

 

The pent-up demand from last year' s hiring standstill " unleashed job openings and employment churn this year" , as Asian economies started recovering from the Covid-19 pandemic' s impact amid their vaccination programmes, the company said.

 

HRnetGroup also placed more candidates in senior and niche positions that commanded higher remuneration packages, which helped gross profit per placement increase by 17.4 per cent.

 

Earnings per share amounted to 3.58 Singapore cents for H1 2021, up from 2.09 cents in H1 2020.

 

The company expects strong local employment within geographies to continue due to border restrictions.

 

" Current talent needs gravitate towards a limited pool that is in high demand, not just for specific skill sets in areas such as digitalisation, but also for the candidates' attributes of adaptability, tenacity and getting things done within a highly fluid business environment," it said in the results filing.

 

No dividend was recommended for H1 2021, the same as in H1 2020.

PHILLIPCAPITAL on Friday initiated a " buy" call on recruitment and staffing firm HRnetGroup HRnetGroup: CHZ +2.6%, projecting an expected turnaround in the hiring landscape for permanent recruitment as well as flexible staffing.

 

These two areas make up 99 per cent of the company' s gross profit in FY2020, the brokerage' s research team said. Singapore, in particular, contributed more than half of the company' s gross profits in the same period.

 

The mainboard-listed firm, it notes, has been able to pull off a successful business model that capitalises on both the scale barriers of permanent recruitment and the high barriers to entry for flexible staffing.

 

It put forward a target price of S$1 for HRnetGroup, indicating an upside of close to 30 per cent from its last closing share price of S$0.77 on Thursday.

 

In its report, PhillipCapital explained that HRnetGroup, Asia' s largest recruitment agency outside of Japan, has the advantage of being asset light, cash rich and also cheap - its analysts calculate that the stock is being traded at markedly lower price-to-earnings ratio than its peers.

 

Plus, the research team adds, HRnetGroup has been generating superior returns on equity (ROEs) to its regional and global recruitment peers.

 

" High ex-cash ROEs are attributable to HRnet' s strong income-generating business, which is built on scale, little PPE and reputable brands, led by an experienced management team which is skilful in identifying talents," the research team said. " Reflecting this, it has been able to generate steady and consistent gross and net margins of 30 to 36 per cent and 11 to 13 per cent respectively."

 

The analysts also praised HRnetGroup' s strong operating cash flows in FY2020, with some 73 per cent of its S$452 million in assets made up of cash and its equivalents. Capital expenditure is also low, at S$1.2 million or 0.3 per cent of total assets annually over the past five years.

 

In terms of growth opportunities, PhillipCapital also sees expansion opportunities for HRnetGroup across North Asia, in particular China, which plans to generate 11 million jobs this year. Amid its ongoing active growth in Asia, the research team speculates that the company is poised to seize these openings with its S$332 million cash hoard in hand.

 

PhillipCapital' s initiation comes on the back of two other " buy" calls from CGS-CIMB and RHB Research earlier this year.

 

On June 30, SIMCO Global acquired 25,838,000 shares of HRnetGroup for a consideration of S$16,148,750, at 62.5 Singapore cents per share.

 

This increased SIMCO Global' s total interest in HRnetGroup from 75.12 per cent to 77.70 per cent, while increasing the deemed interests of founding chairman Peter Sim, executive director and chief executive officer of Recruit Express JS Sim, and executive director and chief legal officer Adeline Sim.

 

Mr Peter Sim founded the company in 1992 and has over 40 years of expertise in social work, human resource management, and talent acquisition.

 

With over 900 consultants spread across 13 Asian cities, the leading recruitment and staffing firm in Asia noted that it is continuing to build out its digital staffing platform in 2021.

 

For its FY20 (ended Dec 31), HRnetGroup reported a record-breaking year in revenue at S$433.0 million, up 2.4 per cent from FY19.

 

For the whole year, HRnetGroup helped 42,998 people secure employment in contract and temporary roles, an increase of 6.4 per cent from FY19.

 

The company also noted that revenue continues to be diversified across many sectors and specialisations and is not dependent on any single sector with its top 10 clients contributing 22.0 per cent to its FY20 revenue.

CGS-CIMB has reiterated its " add" call on HRnetGroup with a higher price target of 82.1 Singapore cents compared to 69.8 cents previously, which is still pegged to 14 times FY2022 price-to-earnings estimates or the recruitment company' s five-year historical mean.

 

This follows a non-deal roadshow (NDR) CGS-CIMB hosted for the recruitment company on June 4, where the research house noted a recovery in, and good volumes for, both the group' s flexible staffing and permanent placement business.

 

It has therefore raised FY2021 to FY2023 earnings per share estimates by 8.3 to 24.7 per cent, respectively, to factor in higher permanent placement volume expectations on a potential recovery in labour markets.

 

This is to be supported by improving economic fundamentals, declining employment rates and positive hiring sentiment across HRnetGroup' s key markets in Singapore and North Asia, said CGS-CIMB analysts in a report on Tuesday.

 

The research house is forecasting FY2021 and FY2022 yields of 3.9 per cent and 4.4 per cent, respectively.

 

Citing ManpowerGroup' s global employment survey for Q3 2021, CGS-CIMB analysts observed that the group' s key markets of Singapore, Taiwan and China all reported positive net employment outlooks. In their view, this reflects increasing business confidence and should translate into more hiring activities as well as job creation.

 

While they noted that while the Covid-19 pandemic is " far from over" in Singapore, the analysts believe its labour markets could be " turning the corner" . They also see Phase 2 (Heightened Alert) as a " small speed bump" to HRnetGroup' s gradual recovery as it does not expect this to dampen hiring sentiment.

 

With the Ministry of Manpower due to publish its labour market report for Q1 of 2021 from June 14-18, the analysts believe positive data points will serve as tailwinds for the stock.

 

" We understand that the technology, finance, government and healthcare sectors remain the bright spots for hiring, according to our NDR with management. HRnetGroup, which derived 60 per cent of its total revenue in FY2020 from these three sectors, should be a beneficiary, in our view," they added.

 

RECRUITMENT firm HRnetGroup saw its net profit sink 31.9 per cent to S$20.99 million for its half-year ended June 30, mostly on the back of an unrealised loss of S$3.6 million on revaluation of financial assets.

 

Revenue fell 1 per cent to S$210.34 million as contributions by the professional recruitment segment declined.

 

Earnings per share stood at 2.09 cents, down from 3.06 cents previously.

 

There was no dividend declared for the period.

 

In its review for the half-year, the group noted that its flexible staffing revenue grew by 7.1 per cent, with all its markets achieving growth with the exception of Hong Kong. Its Singapore business contributed 87.1 per cent of gross profits as it supported clients in providing manpower for essential services during the circuit breaker period, said the group.

 

However, the circuit breaker affected its Singapore professional recruitment business, which declined by 30.5 per cent. Hong Kong continued to bear the brunt of the US-China trade war and local protests, in addition to pandemic woes, which led gross profits for Hong Kong to fall by 55.8 per cent. Gross profits for China and Taiwan in the professional recruitment segment fell by 18.8 per cent and 16 per cent respectively.

 

In its outlook, HRnetGroup said that as recovery appears to be a protracted journey at this juncture, the group will continue to exercise caution and vigilance in credit control, operating expenditure and investment to preserve cash and resources to survive this pandemic.