Analyst Eric Ong says in his Apr 24 report: “With signs of economic slowdown in Singapore becoming more apparent, we take a pre-emptive approach and reassess our numbers ahead of its 1HFY2023 (ending June) results in August.”

Maybank Investment Banking Group (MIBG) recently cut the Singapore GDP forecast to +0.8% (from +1.7%) in 2023 to account for weaker performance in external-oriented sectors, including manufacturing and wholesale trade. With headline GDP growth rising by just +0.1% in 1Q2023, the macro team believes that the country risks entering a technical recession if the boost from China’s reopening fails to materialise in 2Q2023.

There are already some indicators that Singapore’s labour market is cooling due to the deteriorating global economic environment amid sticky cost inflation and geopolitical tensions.

Ong sees China as the group’s “wildcard” to any recovery.

In response to shareholders’ questions during its recent annual general meeting (AGM), the group said that business in China was severely impacted in 1Q2023 due to the challenges in building business pipelines in 4Q2022 when Covid infection was at its peak.

See also: <a class='gtm_see_also_1_inread' style='text-decoration: underline;' href='/capital/brokers-calls/dbs-raises-seas-tp-us78-indonesias-social-commerce-ban?utm_source=website&utm_medium=article&utm_campaign=ONPAGESEO'>DBS raises Sea’s TP to US$78 on Indonesia’s social commerce ban</a>

Since the end of the Lunar New Year celebrations in February, management however saw some resumption of business activity and people have returned to offices. That said, there has been mixed levels of hiring momentum across various sectors in China.

“The next two months will be critical to see how 1H2023 pans out, we think,” says Ong.

Fears of a global recession have impacted the group’s business across its regions in 1QFY2023. While the group sees some modest recovery in 2QFY2023, it believes that 1HFY2023 performance is likely to be significantly lower than in the same period last year.

See also: <a class='gtm_see_also_2_inread' style='text-decoration: underline;' href='/capital/brokers-calls/citi-lowers-parkway-life-reits-tp-385-due-higher-portfolio-cap-rate-and?utm_source=website&utm_medium=article&utm_campaign=ONPAGESEO'>Citi lowers Parkway Life REIT’s TP to $3.85 due to higher portfolio cap rate and higher discount rate</a>

Hence, Ong has cut FY2023 to FY2025 earnings forecasts by 15-18% after factoring in lower placement volumes, especially for its Professional Recruitment (PR) segment. “While management remains optimistic of a potential recovery in 2H2023, underpinned by its China operations, we think the stock is unlikely to perform in the near-term,” says Ong.

As at 3.05pm, shares in HRnetGroup are trading at 75 cents.

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