• HRnetGroup has established a S$30m share buyback (SBB) programme that allows it to purchase its shares which could be used for
  1. Employee share option schemes, and
  2. fund M&A activities.
• We believe this will be strongly positive for HRnetGroup's share price, while the company is benefiting from a strong rebound in recruitment demand. We also expect the demand for professional and flexible staffing to grow further in FY22.
• Maintain BUY and a target price of S$1.01, 31% upside with ~6% FY22F yield.

HRnetGroup's S$30m Share Buyback Programme

• HRnetGroup (SGX:CHZ) intends to purchase up to S$30m worth of its own shares via the open market. The maximum number of shares that it can buy is 100,377,338 (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 HRnetGroup's management, which views its stock as undervalued. Note that management is also very upbeat on the company’s growth prospects.

A Better FY22 Ahead for HRnetGroup

• HRnetGroup’s FY21 results outperformed its pre-pandemic (FY19) numbers. For FY21, revenue and PATMI surged by 36.4% and 39.7% y-o-y to S$590.5m and S$65.5m. Gross profit margin also increased to 39.4%, from 31.9% a year ago.

HRnetGroup's Attractive Dividends Likely to Continue

• Total dividends declared for FY21 amounted to S$35.1m (+25% y-o-y). As HRnetGroup is likely to chart another solid performance this year, we expect it to continue rewarding shareholders with attractive dividends. As a result, we estimate it to pay out 60% of earnings as dividends, translating to a yield of ~6% this year.

Source: RHB Invest Research - 16 Jun 2022