• Maintain BUY and SGD1.01 TP, 28% upside and c.6% yield. 1H22 came in line with our estimates. Revenue rose 14.2% YoY to SGD314.2m while core NPAT rose to 36.2% YoY to SGD42.6m. Going forward, we see hiring remaining resilient despite the possibility of a slight slowdown. A 2.13 SG cent interim DPS has also been declared. We believe that the current share buyback (SBB) programme will also be positive to its share price.

• FY22F to stay solid. For 1H22, HRnetgroup’s flexible and professional recruitment segments grew 13.2% and 18.6% YoY, with Singapore remaining its largest market share. Going forward, hiring is expected to remain strong from the technology, healthcare and consumer sectors. There is potential for a slowdown in hiring, especially if a recession hits, but signs continue to indicate hiring is healthy.

• SGD30m SBB programme to provide share price support. The company intends to purchase up to SGD30m of its shares via the market. The maximum number of shares, which may be purchased by the company under the programme is 100,377,338 (amounting to 10% of its issued shares). Depending on the prices at which the shares are purchased, the programme could take more than a year to be completed. As of 16 Aug 2022, management has already purchased 0.21% of its total shares outstanding. We expect the SBB to continue and likely be a boon to its share price.

• Attractive dividends expected to continue. Management has declared its first ever interim DPS of 2.13 SG cents. With the positive performance likely to continue, management should keep rewarding shareholders with attractive dividends. As a result, we expect a 5.5% dividend yield for FY22F using a 60% payout ratio.

• Outlook still healthy. Management remains bullish for both its recruitment segments across all geographical areas as there is continued strong demand for its services YTD. As a result, we believe the positive performance will continue and the company should benefit from higher margins as well. This counter is also trading at 11x FY22F P/E, which is lower than its global peer average. We believe HRNET is a decent proxy to the global economic recovery. As such, we maintain our BUY call, with our TP is pegged to 14x FY22F P/E.

• ESG. Using our in-house proprietary methodology, we derive an ESG score of 3.0, which is on par with the country median. As a result, we apply a 0% discount or premium to our TP.

Source: RHB Research - 20 Sep 2022