CGS-CIMB Research analysts Darren Ong and Lim Siew Khee are keeping “add” on HRnetGroup with an unchanged target price of $1.15.

The target price is based on 17 times FY2022 price-to-earnings (P/E).

In a Sept 6 report, the analysts say they are turning more positive on the pace of the labour market recovery, they write in a Sept 6 report.


See also: RHB ups HRnetGroup's TP to 93 cents on predicted rebound in recruitment and jobs


This is due to the improving hiring sentiments, growing pressure on employers to increase salaries, as well as the increasing challenges faced to retain and attract talent, according to a survey conducted by Willis Tower Watson on Aug 30.

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On this, the analysts predict that employers in HRnet’s key markets of Singapore and North Asia are expected to raise their salary budgets in FY2021-2022.

“Potential new hires in healthcare life sciences, banking and financial services and manufacturing can expect a salary bump of up to 14-15%; and up to 20% in technology, according to Michael Page’s 2021 Salary Guide,” note the analysts.

“With a 62% exposure to those sectors as of 1HFY2021, we expect tailwinds from higher compensation packages to drive HRnet’s professional recruitment business (c.100% GPM), and shortage of foreign labour from ongoing border restrictions to drive volumes for its flexible staffing business for FY2021-2022,” they add.

On Sept 15, the Ministry of Manpower (MOM) will be releasing its Labour Market Report for the 2Q2021, where the analysts expect positive data points to reaffirm their thesis that the labour market is on the mend.

“Singapore is set to report its third consecutive quarter of improvement in resident unemployment rate to 3.7% (-0.3% pts q-o-q) for 2Q21 according to preliminary MOM estimates,” they write.

“While we note that the unemployment rate may be impacted by tightening restrictions during Phase 2 Heightened Alert, we do not expect this to dampen hiring sentiment as demonstrated by HRNET’s strong set of 1H21 results.”

Going forward, the analysts also expect continued recovery across economies around the world, which may lead to the creation of more jobs and a stronger hiring sentiment. The factors, they say, will further re-rate shares of global recruitment companies in general.


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To this end, a re-rating catalyst for HRnetGroup is the higher number of jobs created, while a downside risk stems from deteriorating macro conditions, which may dampen hiring sentiment.

As at 10.15am, shares in HRnetGroup are trading 0.5 cent lower or 0.64% down at 78 cents, with an FY2021 P/B of 2.24 times and a dividend yield of 3.57%.