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Broker's take: RHB recommends 'buy' HRnetGroup on expected acquisition spree
STRONG cash flows, superior net margins compared to peers and a likely acquisition spree have fuelled RHB's "buy" recommendation on initial coverage of recruitment firm HRnetGroup.
RHB has set a target price of S$1.14, up from the stock's current price of S$0.88 as at 9.32am on Thursday. The shares have seen a 52-week low of S$0.72 and high of S$0.93, with an estimated return of 33 per cent.
The broker says HRnetGroup's war chest of S$280 million after its IPO (initial public offering), coupled with no debt and S$15-20 million in free cash flow is anticipated to ignite an acquisition spree, targeting specialised recruitment firms beginning as early as first-quarter 2018. RHB forecasts the takeovers could add another S$20 million to the company's net profit after tax (NPAT).
HRnetGroup has also seen stable growth and superior margins, and is the market leader in recruitment in Singapore, says RHB. It has also conducted six share buyback exercises, which raised management's stake in the company to 74.29 per cent, even though its shares were only listed in June this year.
HRnetGroup provides professional recruitment, flexible staffing and other HR services, and has its headquarters in Singapore.