Brokers' take: CGS-CIMB raises HRnetGroup target on upbeat hiring outlook

CGS-CIMB has reiterated its "add" call on HRnetGroup with a higher price target of 82.1 Singapore cents compared to 69.8 cents previously, which is still pegged to 14 times FY2022 price-to-earnings estimates or the recruitment company's five-year historical mean.

This follows a non-deal roadshow (NDR) CGS-CIMB hosted for the recruitment company on June 4, where the research house noted a recovery in, and good volumes for, both the group's flexible staffing and permanent placement business.

It has therefore raised FY2021 to FY2023 earnings per share estimates by 8.3 to 24.7 per cent, respectively, to factor in higher permanent placement volume expectations on a potential recovery in labour markets.

This is to be supported by improving economic fundamentals, declining employment rates and positive hiring sentiment across HRnetGroup's key markets in Singapore and North Asia, said CGS-CIMB analysts in a report on Tuesday.

The research house is forecasting FY2021 and FY2022 yields of 3.9 per cent and 4.4 per cent, respectively.

Citing ManpowerGroup's global employment survey for Q3 2021, CGS-CIMB analysts observed that the group's key markets of Singapore, Taiwan and China all reported positive net employment outlooks. In their view, this reflects increasing business confidence and should translate into more hiring activities as well as job creation.

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While they noted that while the Covid-19 pandemic is "far from over" in Singapore, the analysts believe its labour markets could be "turning the corner". They also see Phase 2 (Heightened Alert) as a "small speed bump" to HRnetGroup's gradual recovery as it does not expect this to dampen hiring sentiment.

With the Ministry of Manpower due to publish its labour market report for Q1 of 2021 from June 14-18, the analysts believe positive data points will serve as tailwinds for the stock.

"We understand that the technology, finance, government and healthcare sectors remain the bright spots for hiring, according to our NDR with management. HRnetGroup, which derived 60 per cent of its total revenue in FY2020 from these three sectors, should be a beneficiary, in our view," they added.

Shares of HRnetGroup closed at S$0.715 on Wednesday, up 2.88 per cent.