+ Flexible staffing (FS) resilient and flexible staff cost. Despite the absence of pandemic-related hiring, FS revenue was resilient. Sectors supporting FS in 1H23 were banking, luxury retail, consumer and logistics. FS is also expanding outside Singapore, namely Taipei, Hong Kong and Jakarta. In line with the weaker revenues, employee cost was down 19% YoY, from lower bonus payout and headcount reduction of 83.
– Steep drop in North Asia and Singapore professional recruitment (PR). The drag on 1H23 earnings was the 37% and 31% YoY decline in North Asia and Singapore PR respectively. There was a severe drop in semiconductor and technology type placements. PR hiring will now be driven by industrial, engineering, lifescience and consumer sector roles.
We expect FS to remain the near-term growth driver as corporates pivot towards contingent workers in an uncertain macro backdrop. Another FS growth pillar is expansion overseas, where its advantages are the track record, technology and capital. The strength of the ownership model was reflected by the flexibility to reduce employee expenses. From the $30mn share buyback plan announced in June 2022, there is a balance of S$16.6mn to be completed. In PR both business and candidate confidence is weak, negatively impacting demand and supply.
Maintain BUY and lower TP of S$0.88 (prev. S$0.98).
Our FY23e forecast is cut by 11% to adj. PATMI of S$56mn. The target price is a huge discount to global peers trading at 17x PE. HRnetGroup enjoys net cash of S$303mn with barriers of scale from its nearly 700 recruitment consultants across 16 cities.