SINGAPORE (Nov 10): RHB Research is maintaining its “buy” recommendation on HRnetgroup with a  target price of $1.14 while remaining positive on the group’s latest developments and prospects ahead.

This follows the recruitment firm’s announcement of its new joint venture (JV) with PT Rimbun Job Agency to provide professional recruitment services in Jakarta, Indonesia, which will acquire Rimbun Job’s existing professional recruitment business in the process.

In a Friday report, analyst Jarick Seet says the addition of the JV, HRnet Rimbun, will add Indonesia to the group’s existing presence in 10 Asian cities – and more importantly, significantly increase its existing pool of job seekers and employers by allowing access to the country’s market for any cross-border job placements.

As such, he expects HRnet Rimbun to be accretive to the group’s earnings.

Seet also believes the latest JV deal could signal to the market that HRnetgroup could be starting on an acquisition spree given its $280 million net cash available to further fuel NPAT growth without any dilution, coupled with $15-20 million of free cash flow a year and low capex requirements.

In his view, more acquisitions could potentially occur as early as 1Q18.

“We think that HRnetgroup would likely make more acquisitions in the near future, with a likely focus on new markets in which they are not yet entrenched, like Japan, China, Australia and even Europe. It would also focus on recruitment firms with a specific niche or focus on a particular sector to enhance its portfolio,” says the analyst.  

“We also expect a better 2H17 as compared to 1H17, due to the full impact from the decrease in its minority interest to 6.4% (from 18+%),” he adds.

As at 4:07pm, shares in HRnetgroup are trading 0.57% higher at 88 cents, or 2.67 times FY18 book value.