HRnetGroup
Price target: RHB Bank Singapore ‘buy’ 84 cents
Anticipated economic recovery
RHB Bank Singapore’s Alfie Yeo has kept his “buy” call and 84 cents target price on regional recruitment firm HRnetGroup (HRnet) following “stable” low unemployment rates in Singapore in 4Q2023.
Yeo continues to view HRnet favourably in anticipation of economic recovery within Singapore and China. “Our economist forecasts Singapore’s 2024 GDP growth to accelerate while maintaining strong GDP growth of 5% for China,” says Yeo.
The analyst notes that the gradual improvement of unemployment rates in Singapore from 3Q2023 to 4Q2023 supports the case for recovery.
The Ministry of Manpower (MOM) reported overall unemployment rates in December 2023 at a low 2% with the citizen unemployment rate declining from 3% to 2.9% from 3Q2023 to 4Q2023.
Additionally, retrenchments in 3Q2023 to 4Q2023 also dropped, falling from 4,110 to 3,460. With job vacancies for unemployed individuals growing from 1.64 to 1.74 in 4Q2023 despite previous consecutive quarters of decline, the recruitment rate similarly “inched up” from 2.2 to 2.3.
Besides reported low unemployment rates, the analyst anticipates growing job demand in Singapore and China.
With Singapore’s 2024 GDP growth forecast to accelerate from 2023, it stands at an estimated 2.5% growth rate amid better external environments. With more “robust” global demand supporting the recovery of domestic industries, the demand for labour will subsequently increase.
“MOM, in its report, also indicated that labour demand is expected to strengthen on the back of improving GDP growth,” notes Yeo.
Research findings report that 48% of surveyed firms in December 2023 intend to hire over the next quarter, an improvement from 42.8% recorded in September. A positive outlook of 32.6% of firms planning to raise wages in the next three months also signals a step up from the low of 18% in September 2023.
In the context of China, Yeo forecasts sustained economic recovery and anticipates a 5% GDP growth for this year which could translate to greater job demand.
With these factors considered, Yeo’s target price at 84 cents is pegged at 0.5 standard deviations (s.d.) above the historical mean of the forward P/E, which the analyst deems as “compelling”.
Yeo favours HRnet for its cash-generative ability, strong net cash balance sheet and attractive dividend yield of 5%. With HRnet’s maintained share buyback programme, this will continue to uplift its earnings per share growth.
In addition, HRnet is attractive to the analyst due to its position as a beneficiary of the economic recovery forecasted for FY2024.