In a report dated July 22, RHB Group Research analyst Jarick Seet has maintained “buy” on HRnetGroup, as he foresees the company to benefit “significantly” from the “strong rebound in recruitment and jobs”.

“We expect professional and flexible staffing to rebound to levels stronger what we initially anticipated for FY2021,” he writes.

On this, Seet has upped HRnetGroup’s target price to 93 cents from 72 cents.

He has also increased his net profit estimate for the FY2021 to FY2022 by 29% and 15%, which boosts his target price estimate to its current levels.

The current target price is pegged to 15 times FY2021 price-to-earnings (P/E).

To Seet, the negative impact from Covid-19 on the company’s business has already been priced in.

The company, for the 1HFY2020 ended March, during the pandemic, reported a 27% y-o-y decline in its professional staffing segment. That segment usually yields the highest margins for the HRnetGroup.

The impact has also lingered in the 2HFY2020, says Seet.

That said, as the economy continues to grow and with the pace of recruitment ramping up, earnings should rebound in the 1HFY2021, he writes.

As such, Seet expects HRnetGroup’s upcoming results to show “solid numbers”.

“In the meantime, we expect both its flexible and professional staffing divisions to show strong double-digit recoveries from FY2020 levels,” he adds.

To him, HRnetGroup’s results in the FY2021 may even exceed its pre-pandemic levels.

During the pandemic, HRnetGroup received a major boost from the government for its flexible staffing business, amid increased demand for manpower for vaccination and swab-testing centres.

The company’s professional recruitment business rebounded on higher salaries paid due to companies’ requiring workers in more niche industries to fit the roles they are looking for and thus are willing to pay higher to secure such talent.

For the FY2021, Seet expects a dividend yield of around 3.9% on the company’s net cash balance sheet, strong cash flow generation, as well as a brighter outlook and improved results ahead.

“HRnetGroup has been an efficiently run company compared to its global peers – many of these are running at a loss during this tough period. It is still generating positive cash flow, and has $333 million in net cash – which is equivalent to 60% of its market cap,” writes Seet.

“This counter is also trading at 12.9 times FY2021F P/E, which is lower than its global peers average. We believe HRnetGroup is a decent proxy to the global economic recovery, and will enjoy a great FY2021.”

Shares in HRnetGroup closed 2.5 cents higher or 3.2% up at 80 cents on July 23, or 2.3 times P/B, according to RHB’s estimates.

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