Listed on the main board of the SGX on 16 June 2017, HRnetGroup is the largest recruitment agency in Asia, ex-Japan. It has over 900 consultants in 13 Asian cities. Singapore is its stronghold, contributing 54.5% to its FY20 gross profit. PR generated 56% of its FY20 gross profit and FS, 43%. Other services include payroll processing and outsourcing of recruitment processes.
We initiate coverage with a BUY rating. Our target price of S$1.00 is set at 14x FY21e ex-cash P/E (net of interest income after tax), given that HRnet has been generating superior ROEs than most regional and global recruitment peers. Historical high of HRnet’s ex-cash P/E is c.14x.
HRnet has two main businesses: PR, which formed 17% of its FY20 revenue and FS, which formed 82%. Other services include payroll processing and outsourcing of recruitment processes (1%). HRnet has clients spanning industries such as financial institutions, information technology, retail and consumer, manufacturing and government. Its top 10 and 5 clients contributed 22.0% and 14.8% to its FY20 revenue respectively.