Brokers’ take: Maybank downgrades HRnetGroup to ‘hold’ on economic slowdown

MAYBANK Securities downgraded its call on HRnetGroup to “hold” from “buy” and slashed its target price to S$0.85 from S$1.04. It anticipates a decline in the recruiting and consulting company’s earnings amid a slowdown in Singapore’s economy.

The revised target reflected lower earnings estimates for FY2023 to FY2025 after assuming lower placement volumes, especially for the company’s professional recruitment segment.

It remains based on a 15 times FY2023 price-to-earnings ratio estimate.

Maybank’s downgrade came as Singapore’s gross domestic product (GDP) growth for the first fiscal quarter came in weaker than expected, said analyst Eric Ong on Monday (Apr 24).

“With headline GDP growth rising by just 0.1 per cent in Q1, our macro team believes the country risks entering a technical recession if the boost from China’s reopening fails to materialise in Q2,” he added.

Despite HRnetGroup’s management remaining optimistic of a potential recovery in the second half of the financial year, Ong said the stock is “unlikely to perform in the near term”.

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The analyst lowered his earnings per share forecasts for FY2023 to FY2025 by 15 per cent to 18 per cent to account for slower hiring momentum in Singapore, which contributes to the bulk of HRnetGroup’s topline.

The lower projections are also based on the mainboard-listed company’s expectations that its performance in the first half will be “significantly lower” than in the same period last year, despite modest recovery in Q2.

While the downgrade is premised on Singapore’s economic slowdown, Ong believes China’s recovery in the near term may point to re-rating opportunities for HRnetGroup.

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“That said, there have been mixed levels of hiring momentum across various sectors in China,” he said. “The next two months will be critical to see how H1 pans out.”

Shares of HRnetGroup were trading 0.6 per cent or S$0.01 lower as at 11.17 am on Tuesday.