SINGAPORE (Feb 25): RHB Research is keeping its “buy” call on HRnetGroup, despite the human resource recruitment agency getting rocked by non-core one-offs in the 4Q18 ended December.

4Q18 PATMI fell 48% to $6.3 million, mainly due to a one-off revaluation loss of $5.7 million and a one-off bad debt provision of $1.6 million.

“Excluding these one-offs, core PATMI would have risen 4.6% y-o-y to $13.6 million, in line with our estimates,” says lead analyst Jarick Seet in a Monday report.

HRnetGroup saw its full-year earnings increase 12.9% to a record $52.4 million for FY18, as revenue crossed the $400 million milestone for the first time, growing 9.3% to $428.5 million.

See: HRnetGroup reports record FY18 earnings of $52.4 mil

Moving forward, however, RHB sees some headwinds for HRnetGroup due to geopolitical uncertainties.

“Due to the ongoing trade war issues, management revealed that some companies are holding off hiring while awaiting for the trade talks to settle and have noticed some weakness in their business in 1Q19, especially in China,” Seet says.

As a result, the research house is cutting its PATMI estimates for FY19-20 by 5-6%. Consequently, it is lowering its target price to $1.06, from $1.18 previously.

Meanwhile, HRnetGroup has said it is in talks for a potential M&A in Vietnam with a company that is similar in size to their previous acquisition, REForce.

“We learned the target company is profitable and estimate it will be accretive to its bottom-line,” Seet says. “With $290 million in net cash, a 3% dividend yield and potential upcoming accretive acquisitions, we maintain ‘buy’.”

As at 12pm, shares in HRnetGroup are trading half a cent lower at 79 cents, implying an estimated price-to-earnings (PE) ratio of 15.3 times and a dividend yield of 3.3% for FY19.