SGX Market Strategist, Equity & Fixed Income, Singapore Exchange Ltd (SGX)

Geoff Howie

SGX Market Strategist, Equity & Fixed Income

Asia’s leading multi-asset exchange

Singapore Exchange Ltd (SGX)

Singapore Exchange is Asia’s leading and trusted market infrastructure, facilitating the exchange of capital and ideas to create value for people, businesses and economies. As a multi-asset exchange operating equity, fixed income and derivatives markets to the highest regulatory standards, SGX is a vertically integrated business that provides listing, trading, clearing, settlement, depository and data services.

With about 40% of listed companies and over 80% of listed bonds originating outside of Singapore as well as established linkages across the region and in Europe, SGX is Asia’s most international and connected exchange. Offering a full suite of derivatives products across Asian equity indices, commodities and currencies, SGX is the world’s most liquid international market for the benchmark equity indices of China, India, Japan and ASEAN.

As Asia’s pioneering central counterparty, SGX is globally recognised for its risk management and clearing capabilities, and was one of the first globally to adopt the Principles for Financial Market Infrastructure.

Headquartered in AAA-rated Singapore, SGX has over 800 employees including offices in Beijing, Chicago, Hong Kong, London, New York, Mumbai, San Francisco, Shanghai and Tokyo.

Equity Bottom-Up

<ul><li>Inside Insights - Share buybacks by primary-listed companies OCBC, Singapore Technologies Engineering, Venture Corporation, City Developments and Sembcorp Industries led the net institutional inflow for the five sessions.</li><li>SIA Engineering Company bought back 148,100 shares at an average price of S$2.50 per share while Valuetronics Holdings bought back 320,000 shares at an average price of S$0.54 per share.</li></ul>

Inside Insights - Share buybacks by primary-listed companies OCBC, Singapore Technologies Engineering, Venture Corporation, City Developments and Sembcorp Industries led the net institutional inflow for the five sessions.SIA Engineering Company bought back 148,100 shares at an average price of S$2.50 per share while Valuetronics Holdings bought back 320,000 shares at an average price of S$0.54 per share.

OCBC leads net fund inflows; JB Foods’ Goh Lee Beng increases stake

<ul><li>The STI booked a 3.5% gain in Jan, with five REITs ranking among the seven best performing STI constituents for the month.</li><li>As 10yr UST yields declined to 3.5%, these five REITs averaged 9.5% total returns on the month, following their 16.4% average declines in total return in 2022.</li><li>Among the 100 most traded Singapore stocks in Jan, eight stocks represented the Technology Sector, averaging 11% total returns in Jan, following a 36% decline in total return in 2022.</li></ul>

The STI booked a 3.5% gain in Jan, with five REITs ranking among the seven best performing STI constituents for the month.As 10yr UST yields declined to 3.5%, these five REITs averaged 9.5% total returns on the month, following their 16.4% average declines in total return in 2022.Among the 100 most traded Singapore stocks in Jan, eight stocks represented the Technology Sector, averaging 11% total returns in Jan, following a 36% decline in total return in 2022.

STI Posts 3.5% Gain in January, led by REITs & China Outlook

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<p>For the 5 trading sessions that spanned Mar 25 to 31, the Straits Times Index (STI) gained 0.3 per cent, while the FTSE China A50 Index dipped 0.1 per cent, the Hang Seng Index slipped 0.1 per cent and the FTSE Bursa Malaysia KLCI fell 0.6 per cent.<br><br>
Overall, institutions were net sellers over the 5 sessions with S$143 million of net outflow. DBS Group Holdings, UOB, Mapletree Commercial Trust, Keppel Corporation and Wilmar International led the net institutional outflows for the 5 sessions through to Mar 31.<br><br>
Meanwhile, Singapore Airlines, City Developments, SATS, SIA Engineering Company and Mapletree North Asia Commercial Trust received the highest net institutional inflows for the 5 sessions. <br><br>
For Q1 2022, Singapore stocks received S$1.12 billion of net institutional inflows, with Singapore Telecommunications,  OCBC,  UOB, Mapletree North Asia Commercial Trust and Wilmar International drawing the most net institutional inflows.<br><br><strong>Share buybacks</strong><br><br>
There were 18 primary-listed stocks conducting share buybacks over the 5 sessions with a total consideration of S$11.9 million, down from S$15.7 million for the preceding week.<br><br>
OCBC, Raffles Medical Group and Hong Fok Corporation led the buyback consideration tally. OCBC paid an average price of S$12.40 per share, while Raffles Medical Group paid S$1.17 per share.<br><br>
For Q1 2022, Keppel led the buyback consideration tally for primary-listed stocks buying back 27.3 million shares, with a consideration of S$164.2 million, at an average price of S$6.02 per share.<br><br>
On Jan 27, Keppel announced the establishment of a S$500 million share buyback programme, pursuant to the share purchase mandate granted by its shareholders at the company's previous AGM. The company noted that shares repurchased will be held as treasury shares which will be used in part for the annual vesting of employee share plans, but also as possible currency for future merger and acquisition (M&amp;A) activities.<br><br>
For the quarter, OCBC bought back 3.5 million shares at an average price of S$12.05, while Raffles Medical Group bought back 13.2 million shares at an average price of S$1.18 per share.<br><br><strong>Director and substantial shareholder transactions</strong><br><br>
The 5 trading sessions saw almost 100 changes to director interests and substantial shareholdings filed for 40 primary-listed stocks.<br><br>
This included 14 company director acquisitions with 3 disposals filed, while substantial shareholders reported 11 acquisitions and 3 disposals.<br><br><strong>HRnetGroup</strong><br><br>
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.<br><br>
Peter Sim founded the company in 1992 and has more than 40 years of expertise in social work, human resource management, and talent acquisition.<br><br>
HRnetGroup has since grown its business to over 900 consultants spread across 13 Asian cities.<br><br>
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.<br><br>
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.<br><br>
In FY21, the company facilitated 7,794 permanent job placements while placing 54,448 unique contractor headcounts for the year.<br><br>
On Dec 30, 2021, 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.<br><br>
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.<br><br><strong>Olam Group</strong><br><br>
On Mar 28, Olam Group Olam Intl : O32 0% independent non-executive director Nihal Kaviratne acquired 133,100 shares of the company at an average price of S$1.79 per share. With a consideration of S$237,985, this increased his direct interest in Olam Group to 0.1 per cent.<br><br>
Kaviratne was previously the chairman and CEO for the Unilever Group across Asia, Europe and Latin America. His career with the Unilever Group spanned 40 years which also covered senior level management positions in sales, marketing, brand and strategic planning and development.<br><br>
Olam Group has now completed the first 3 of 4 steps of its transformational re-organisation plan to re-organise its diverse business portfolio into 3 distinct operating groups - Olam Food Ingredients, Olam Agri and Olam. Olam Food Ingredients intends to seek a primary listing in London, and a concurrent secondary listing in Singapore.<br><br>
On Mar 25, Olam Group announced that in the light of current market conditions, and as a result of the ongoing conflict in Ukraine, it did not expect the IPO of Olam Food Ingredients to take place during Q2 2022, as was previously planned.<br><br><strong>Amos Group</strong><br><br>
Between Mar 28 and 29, Amos Group executive chairman Kyle Shaw acquired 465,000 shares of the company at an average price of 17.2 cents per share. With a consideration of S$80,081, this increased his deemed interest in the company from 80.51 per cent to 80.77 per cent.<br><br>
Shaw is the founder and managing partner of ShawKwei &amp; Partners, an international private equity fund manager investing in mid-market industrial and service businesses across Asia, the United States, and Europe.<br><br>
The Amos Group serves multinational customers in the marine and energy industries across a network of facilities spanning Asia, the Middle East, and Europe. The group supplies customers with technical services and supply solutions across 4 of the most vibrant oil and gas production zones on earth and through 4 of the world's busiest ports - Singapore, Shanghai, Hong Kong and Busan. The group is expected to report its FY22 (ended Mar 31) results at the end of May.<br><br><strong>Tai Sin Electric</strong><br><br>
On Mar 23, Tai Sin Electric executive director and CEO Bernard Lim Boon Hock acquired 115,300 shares of the company at an average price of 39.0 cents per share. With a consideration of S$44,967, this took his total interest in Tai Sin Electric from 17.35 per cent to 17.38 per cent.<br><br>
Lim has gradually increased his total interest in Tai Sin Electric from 14.82 per cent at the end of 2019 and he has been an executive director of the company since September 1997.<br><br><strong>Challenger Technologies</strong><br><br>
Between Mar 23 and 29, Digileap Capital acquired 50,400 shares of Challenger Technologies Challenger : 573 0% at 58.0 cents per share. This took the deemed interest of non-executive non-independent director Tan Keng Soon in the Singapore-focused multi-brand IT retailer from 15.03 per cent to 15.04 per cent. Tan is the co-founder and manager partner of Dymon Asia Capital and was recently appointed to the board of Challenger Technologies, on Nov 29, 2021.<br><br><strong>Tye Soon</strong><br><br>
On Mar 29, Tye Soon managing director David Chong Tek Yew acquired 55,000 shares of the company for a consideration of S$21,900 at an average price of 39.8 cents per share. This followed on from Wong Huay Shien, the Chong's spouse, also acquiring 30,200 shares of Tye Soon on Mar 30 at 39.5 cents per share.<br><br>
The 3 transactions took Chong's total interest in the independent automotive parts distributor from 3.25 per cent to 3.35 per cent.<br><br>
Joining as group general manager/executive director in 1998, Chong was appointed deputy managing director in 2002, before being appointed managing director in February 2014.<br><br>
On Feb 23, Tye Soon reported that profit after tax totalled S$4.5 million for its FY21 (ended Dec 31), up from S$1.3 million in FY20.<br><br>
Partnering its principals mostly from Europe, Japan and Korea, the group has one of the largest portfolios of top-tier global brands of automotive parts.<br><br><strong>LHT Holdings</strong><br><br>
On Mar 25, LHT Holdings managing director, Yap Mui Kee, acquired 52,100 shares of the company for a consideration of S$36,991. At 71.0 cents per share, this took her total interest in the manufacturer of high-quality wooden pallets, boxes, and crates from 14.79 per cent to 14.89 per cent.<br><br>
This followed her acquisitions of 17,700 shares at 70.0 cents per share on Mar 18 and 24,600 shares of at 69.1 cents per share on Mar 7.</p>

<p>Yap has over 35 years of experience in sales and marketing and plays a key role in exploring opportunities in new markets.<br><br><strong><em>Inside Insights is a weekly column on The Business Times,<a href="https://www.businesstimes.com.sg/companies-markets/green-shoots-for-retail-and-hospitality-s-reits-amid-new-pandemic-phase"> </a><a href="https://www.businesstimes.com.sg/companies-markets/hrnetgroups-largest-shareholder-raises-stake-1">read </a>the original version.</em></strong></p>
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    Share buyback


For the 5 trading sessions that spanned Mar 25 to 31, the Straits Times Index (STI) gained 0.3 per cent, while the FTSE China A50 Index dipped 0.1 per cent, the Hang Seng Index slipped 0.1 per cent and the FTSE Bursa Malaysia KLCI fell 0.6 per cent.  
Overall, institutions were net sellers over the 5 sessions with S$143 million of net outflow. DBS Group Holdings, UOB, Mapletree Commercial Trust, Keppel Corporation and Wilmar International led the net institutional outflows for the 5 sessions through to Mar 31.  
Meanwhile, Singapore Airlines, City Developments, SATS, SIA Engineering Company and Mapletree North Asia Commercial Trust received the highest net institutional inflows for the 5 sessions.   
For Q1 2022, Singapore stocks received S$1.12 billion of net institutional inflows, with Singapore Telecommunications,  OCBC,  UOB, Mapletree North Asia Commercial Trust and Wilmar International drawing the most net institutional inflows.  Share buybacks  
There were 18 primary-listed stocks conducting share buybacks over the 5 sessions with a total consideration of S$11.9 million, down from S$15.7 million for the preceding week.  
OCBC, Raffles Medical Group and Hong Fok Corporation led the buyback consideration tally. OCBC paid an average price of S$12.40 per share, while Raffles Medical Group paid S$1.17 per share.  
For Q1 2022, Keppel led the buyback consideration tally for primary-listed stocks buying back 27.3 million shares, with a consideration of S$164.2 million, at an average price of S$6.02 per share.  
On Jan 27, Keppel announced the establishment of a S$500 million share buyback programme, pursuant to the share purchase mandate granted by its shareholders at the company's previous AGM. The company noted that shares repurchased will be held as treasury shares which will be used in part for the annual vesting of employee share plans, but also as possible currency for future merger and acquisition (M&amp;A) activities.  
For the quarter, OCBC bought back 3.5 million shares at an average price of S$12.05, while Raffles Medical Group bought back 13.2 million shares at an average price of S$1.18 per share.  Director and substantial shareholder transactions  
The 5 trading sessions saw almost 100 changes to director interests and substantial shareholdings filed for 40 primary-listed stocks.  
This included 14 company director acquisitions with 3 disposals filed, while substantial shareholders reported 11 acquisitions and 3 disposals.  HRnetGroup  
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.  
On Dec 30, 2021, 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.  Olam Group  
On Mar 28, Olam Group Olam Intl : O32 0% independent non-executive director Nihal Kaviratne acquired 133,100 shares of the company at an average price of S$1.79 per share. With a consideration of S$237,985, this increased his direct interest in Olam Group to 0.1 per cent.  
Kaviratne was previously the chairman and CEO for the Unilever Group across Asia, Europe and Latin America. His career with the Unilever Group spanned 40 years which also covered senior level management positions in sales, marketing, brand and strategic planning and development.  
Olam Group has now completed the first 3 of 4 steps of its transformational re-organisation plan to re-organise its diverse business portfolio into 3 distinct operating groups - Olam Food Ingredients, Olam Agri and Olam. Olam Food Ingredients intends to seek a primary listing in London, and a concurrent secondary listing in Singapore.  
On Mar 25, Olam Group announced that in the light of current market conditions, and as a result of the ongoing conflict in Ukraine, it did not expect the IPO of Olam Food Ingredients to take place during Q2 2022, as was previously planned.  Amos Group  
Between Mar 28 and 29, Amos Group executive chairman Kyle Shaw acquired 465,000 shares of the company at an average price of 17.2 cents per share. With a consideration of S$80,081, this increased his deemed interest in the company from 80.51 per cent to 80.77 per cent.  
Shaw is the founder and managing partner of ShawKwei &amp; Partners, an international private equity fund manager investing in mid-market industrial and service businesses across Asia, the United States, and Europe.  
The Amos Group serves multinational customers in the marine and energy industries across a network of facilities spanning Asia, the Middle East, and Europe. The group supplies customers with technical services and supply solutions across 4 of the most vibrant oil and gas production zones on earth and through 4 of the world's busiest ports - Singapore, Shanghai, Hong Kong and Busan. The group is expected to report its FY22 (ended Mar 31) results at the end of May.  Tai Sin Electric  
On Mar 23, Tai Sin Electric executive director and CEO Bernard Lim Boon Hock acquired 115,300 shares of the company at an average price of 39.0 cents per share. With a consideration of S$44,967, this took his total interest in Tai Sin Electric from 17.35 per cent to 17.38 per cent.  
Lim has gradually increased his total interest in Tai Sin Electric from 14.82 per cent at the end of 2019 and he has been an executive director of the company since September 1997.  Challenger Technologies  
Between Mar 23 and 29, Digileap Capital acquired 50,400 shares of Challenger Technologies Challenger : 573 0% at 58.0 cents per share. This took the deemed interest of non-executive non-independent director Tan Keng Soon in the Singapore-focused multi-brand IT retailer from 15.03 per cent to 15.04 per cent. Tan is the co-founder and manager partner of Dymon Asia Capital and was recently appointed to the board of Challenger Technologies, on Nov 29, 2021.  Tye Soon  
On Mar 29, Tye Soon managing director David Chong Tek Yew acquired 55,000 shares of the company for a consideration of S$21,900 at an average price of 39.8 cents per share. This followed on from Wong Huay Shien, the Chong's spouse, also acquiring 30,200 shares of Tye Soon on Mar 30 at 39.5 cents per share.  
The 3 transactions took Chong's total interest in the independent automotive parts distributor from 3.25 per cent to 3.35 per cent.  
Joining as group general manager/executive director in 1998, Chong was appointed deputy managing director in 2002, before being appointed managing director in February 2014.  
On Feb 23, Tye Soon reported that profit after tax totalled S$4.5 million for its FY21 (ended Dec 31), up from S$1.3 million in FY20.  
Partnering its principals mostly from Europe, Japan and Korea, the group has one of the largest portfolios of top-tier global brands of automotive parts.  LHT Holdings  
On Mar 25, LHT Holdings managing director, Yap Mui Kee, acquired 52,100 shares of the company for a consideration of S$36,991. At 71.0 cents per share, this took her total interest in the manufacturer of high-quality wooden pallets, boxes, and crates from 14.79 per cent to 14.89 per cent.  
This followed her acquisitions of 17,700 shares at 70.0 cents per share on Mar 18 and 24,600 shares of at 69.1 cents per share on Mar 7.

Yap has over 35 years of experience in sales and marketing and plays a key role in exploring opportunities in new markets.  Inside Insights is a weekly column on The Business Times, read the original version.



HRnetGroup's largest shareholder raises stake

<div><em><strong>Non- SGX Report: These equity research reports are not written by the SGX.&nbsp;</strong>SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.</em></div>
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<h2>HRnetGroup Limited</h2>
<h3>Record breaker</h3>
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<li>Record gross profit and NPAT. Revenue increased 30.8% YoY on the back of higher permanent-recruitment rates and flexible-staffing volume. 1H21 gross profit in line at 51% of our FY21e forecast. NPAT surpassed at 75% with gains from disposal of financial assets and lower SG&amp;A.</li>
<li>Flexible-staffing growth likely to continue amid business uncertainties. Permanent- recruitment volume to pick up with countries’ reopening.</li>
<li>Maintain BUY with a higher TP of S$1.05 from S$1.00. After adjusting for one-off items, our FY21e core PATMI increases by 8.8% as we lift flexible-staffing revenue and lower SG&amp;A expenses. Our TP remains pegged to 14x FY21e ex-cash P/E, HRnet’s historical 5-year high as we anticipate labour market recovery and potential M&amp;As.</li>
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<p><strong>The Positives</strong><br><strong>+ Record gross profit and NPAT.</strong> 1H21 revenue and gross profit were in line at 54%/51%, but NPAT and PATMI exceeded at 75% of our estimates. We attribute this to S$6.8mn of net fair value gains from its disposal of financial assets and lower-than-expected SG&amp;A expenses. Permanent-staffing revenue grew 25.1%, underpinned by a 17.5% increase in revenue per placement YoY as HRnet filled more senior and niche positions that command higher remuneration packages. Flexible-staffing revenue rose by 31.9% on the back of a 47.1% YoY spike in the number of contractors hired to an all-time-high of 17,123 in June 2021. This was thanks to its Recruit First business expansion in 2019 and 2020 and clients’ preference for manpower flexibility amid business uncertainties.</p>
<p><strong>+ Recovery in key markets.</strong> Singapore is HRnet’s largest revenue and gross-profit contributor. 1H21 gross profit in this market grew 31.1% YoY: flexible staffing +33.5% and permanent recruitment +25.0%. Gross profit in North Asia, comprising China, Hong Kong and Taiwan, was up 29.9% YoY: flexible staffing +57.6% and permanent recruitment +23.9%. Volume growth was notably strong for flexible staffing in Rest of Asia, particularly Malaysia and Indonesia, where gross profit surged 40.8%.</p>
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Non- SGX Report: These equity research reports are not written by the SGX.&nbsp;SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.






HRnetGroup Limited
Record breaker





Record gross profit and NPAT. Revenue increased 30.8% YoY on the back of higher permanent-recruitment rates and flexible-staffing volume. 1H21 gross profit in line at 51% of our FY21e forecast. NPAT surpassed at 75% with gains from disposal of financial assets and lower SG&amp;A.
Flexible-staffing growth likely to continue amid business uncertainties. Permanent- recruitment volume to pick up with countries’ reopening.
Maintain BUY with a higher TP of S$1.05 from S$1.00. After adjusting for one-off items, our FY21e core PATMI increases by 8.8% as we lift flexible-staffing revenue and lower SG&amp;A expenses. Our TP remains pegged to 14x FY21e ex-cash P/E, HRnet’s historical 5-year high as we anticipate labour market recovery and potential M&amp;As.






The Positives + Record gross profit and NPAT. 1H21 revenue and gross profit were in line at 54%/51%, but NPAT and PATMI exceeded at 75% of our estimates. We attribute this to S$6.8mn of net fair value gains from its disposal of financial assets and lower-than-expected SG&amp;A expenses. Permanent-staffing revenue grew 25.1%, underpinned by a 17.5% increase in revenue per placement YoY as HRnet filled more senior and niche positions that command higher remuneration packages. Flexible-staffing revenue rose by 31.9% on the back of a 47.1% YoY spike in the number of contractors hired to an all-time-high of 17,123 in June 2021. This was thanks to its Recruit First business expansion in 2019 and 2020 and clients’ preference for manpower flexibility amid business uncertainties.
+ Recovery in key markets. Singapore is HRnet’s largest revenue and gross-profit contributor. 1H21 gross profit in this market grew 31.1% YoY: flexible staffing +33.5% and permanent recruitment +25.0%. Gross profit in North Asia, comprising China, Hong Kong and Taiwan, was up 29.9% YoY: flexible staffing +57.6% and permanent recruitment +23.9%. Volume growth was notably strong for flexible staffing in Rest of Asia, particularly Malaysia and Indonesia, where gross profit surged 40.8%.














(Non-SGX Report) HRnetGroup Limited: Record Breaker

<p><em><strong>Non- SGX Report: These equity research reports are not written by the SGX</strong>.&nbsp;SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.</em></p>
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<h2>HRnetGroup Limited</h2>
<h3>Hire returns</h3>
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<li>One of the largest recruitment agencies in Asia-Pac ex-Japan with an asset-light, net-cash (S$332mn) and high-return (FY21e ex-cash ROE of 152%) business.</li>
<li>&nbsp;Economic recovery to revive employment in key service sectors. Higher contract volumes and rates expected for both permanent recruitment (PR) and flexible staffing (FS) solutions.</li>
<li>&nbsp;Trades at 16.2x P/E against peer average of 24.4x, even though it is the most profitable employment agency in town. After net cash of S$332mn, it trades at ex-cash P/Es of 9.2x/8.9x on FY21e/22e EPS. We initiate coverage with BUY and a TP of S$1.00, set at 14x FY21e ex-cash P/E.</li>
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<p><strong>Company Background</strong></p>
<p>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.</p>
<p><strong>Investment Merits</strong></p>
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<li>Most profitable of them all. As a human-resource business, its operations do not require much PPE. Its 152% ex-cash ROE can be attributed to strong income generation built on scale and reputable brands, led by an experienced board and management team. According to Frost &amp; Sullivan, HRnet is the largest employment agency in Singapore with a 20.5% market share based on 2015 revenue. In a recent ACRA compilation, HRnet remained the largest and most profitable recruitment service player in Singapore.</li>
<li>High barriers to entry for FS and scale barriers for PR. Complementing each other, PR performs well during economic expansion while FS protects HRnet during downturns. Creating scale in both trades is not easy. FS requires a lot of liquid capital. Contract employees are frequently paid upfront before clients reimburse recruitment agencies. A strong balance sheet is therefore required to enter and grow this business. On the other hand, PR faces high barriers to scale. To increase volume, PR firms need to be able to manage and train batches of headhunters effectively. It took HRnet years to find a golden methodology for its PR business.</li>
<li>Turnaround in hiring. In 4Q20 and 1Q21, 18,700 and 17,600 new jobs were created in Singapore, following renewed hiring by the F&amp;B, community, social and personal service industries. HRnet’s PR and FS volumes and rates increased, driven by urgent market needs to fill positions left vacant during the pandemic. We expect FY21e bottom line to improve 1.9% YoY, after accounting for easing Covid-19 government grants.</li>
<li>Cash-rich and cheap. HRnet is trading at 16.2x FY21e P/E, significantly lower than its peer average of 24.4x. Stripping out net cash of S$332.2mn which is equivalent to 43% of its market cap, it trades at ex-cash P/Es of 9.2x/8.9x on FY21e/22e EPS. A strong cash hoard positions HRnet for any earnings-accretive North Asian opportunities that may come its way.</li>
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<p>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.</p>
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Non- SGX Report: These equity research reports are not written by the SGX.&nbsp;SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.




HRnetGroup Limited
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One of the largest recruitment agencies in Asia-Pac ex-Japan with an asset-light, net-cash (S$332mn) and high-return (FY21e ex-cash ROE of 152%) business.
&nbsp;Economic recovery to revive employment in key service sectors. Higher contract volumes and rates expected for both permanent recruitment (PR) and flexible staffing (FS) solutions.
&nbsp;Trades at 16.2x P/E against peer average of 24.4x, even though it is the most profitable employment agency in town. After net cash of S$332mn, it trades at ex-cash P/Es of 9.2x/8.9x on FY21e/22e EPS. We initiate coverage with BUY and a TP of S$1.00, set at 14x FY21e ex-cash P/E.






Company Background
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.
Investment Merits

Most profitable of them all. As a human-resource business, its operations do not require much PPE. Its 152% ex-cash ROE can be attributed to strong income generation built on scale and reputable brands, led by an experienced board and management team. According to Frost &amp; Sullivan, HRnet is the largest employment agency in Singapore with a 20.5% market share based on 2015 revenue. In a recent ACRA compilation, HRnet remained the largest and most profitable recruitment service player in Singapore.
High barriers to entry for FS and scale barriers for PR. Complementing each other, PR performs well during economic expansion while FS protects HRnet during downturns. Creating scale in both trades is not easy. FS requires a lot of liquid capital. Contract employees are frequently paid upfront before clients reimburse recruitment agencies. A strong balance sheet is therefore required to enter and grow this business. On the other hand, PR faces high barriers to scale. To increase volume, PR firms need to be able to manage and train batches of headhunters effectively. It took HRnet years to find a golden methodology for its PR business.
Turnaround in hiring. In 4Q20 and 1Q21, 18,700 and 17,600 new jobs were created in Singapore, following renewed hiring by the F&amp;B, community, social and personal service industries. HRnet’s PR and FS volumes and rates increased, driven by urgent market needs to fill positions left vacant during the pandemic. We expect FY21e bottom line to improve 1.9% YoY, after accounting for easing Covid-19 government grants.
Cash-rich and cheap. HRnet is trading at 16.2x FY21e P/E, significantly lower than its peer average of 24.4x. Stripping out net cash of S$332.2mn which is equivalent to 43% of its market cap, it trades at ex-cash P/Es of 9.2x/8.9x on FY21e/22e EPS. A strong cash hoard positions HRnet for any earnings-accretive North Asian opportunities that may come its way.

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.












(Non-SGX Report) HRnetGroup Limited: Hire Returns

Singapore

HRnetGroup is a leading recruitment and staffing firm in Asia, offering professional recruitment services and flexible staffing solutions under various brands. The company operates across multiple industries and has a presence in numerous Asian cities. HRnetGroup is headquartered in Singapore and was founded in 1992.

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