Is HRnetGroup A Good Investment? (SGX:CHZ)

It’s been quite a ride for HRnetGroup the past year. The Singapore-based recruitment and staffing firm was expected to perform badly during the Covid-19 pandemic. Luckily for investors, the company only turned a smaller profit and managed to stay in the green for 2020. It even managed to continue to pay a reasonable albeit smaller dividend.

Now, with the expected surge in demand for hiring and workers due to normalization of business trends, the share price for the HR firm has done well, rising from a low of S$0.405 to it’s current share price of S$0.795, a capital gain of 50%. The company has also benefited from the increased coverage from analysts citing higher target prices. But how does HRnetGroup conduct it’s business exactly? And are the target prices justified?

HRnetGroup’s Business Model

HRnetGroup is a HR solutions firm which operates in Singapore and North Asia, which includes countries such as Hong Kong, China, and Taiwan. The company mainly operates in two segments, namely Professional recruitment and Flexible staffing.

Professional recruitment involves the seeking, interviewing, and hiring of suitable candidates for firms in mostly mid to senior level positions. This would include services such as onboarding, which is the process of integrating a new employee with a company and its culture, and negotiating and crafting of contract terms. HRnetGroup is paid commission fees when the employee is hired.

Flexible staffing is the recruitment of short term or contract based employees to firms. These positions are normally for junior to mid level roles. Like Permanent placement, this also involves searching and recruitment, as well as onboarding and contract negotiation. Revenue for flexible staffing is recognised over time as the customer simultaneously receives and consumes the services HRnetGroup provides.

The company also provides other services such as payroll services, recruitment process outsourcing, and business process outsourcing. However, revenue from these services only constitute a very small amount of gross profit (1%).

In terms of volume, Flexible staffing tends to handle much more employees than Professional recruitment. However, Professional recruitment are the company’s main profit driver as their margins are much higher. This can be seen from annual total revenues and net profit; whenever Professional recruitment experiences a surge, net profits shoot up as well.

Value Added Benefits

The company provides comprehensive HR services to it’s clients, essentially serving as the de facto human resource component of a company. It’s agents would be able to assist with the tasks of searching and interviewing of candidates on various platforms such as Linkedin and Jobstreet, and conduct of interviews to assess for suitability.

For smaller businesses, they can choose to fully outsource their HR requirements to HRnetGroup. This would minimize their capital outlay to recruit and train their respective HR departments, which might also not be feasible for smaller firms. By working with specialized HR firms such as HRnetGroup, the client would also be able to tap directly into their experience and expertise.

For larger clients with their own in-house HR departments, HRnetGroup can provide retained recruiters, who are attached exclusively to a client firm, to assist in their HR functions. This would allow clients to gain external HR expertise to fill newer, emerging departments, and allow clients to focus on their core business.


HRnetGroup’s total revenues and gross profits have stayed at roughly the same level for the past 4 years. Their net profit margin has hovered around 11-13% for the past couple years depending on the performance of different segments. At a share price of $0.795, the company currently trades at a PE ratio of 17x.

The company has a dividend policy of paying out a minimum of 50% of profits attributable to shareholders. For the past few years, they have been following this payout ratio. Based on their current share price, investors would be able to receive a dividend yield of 3.14%.


Most analysts are expecting a increase in hiring volumes as companies adapt to the new normal, and business sentiment returns across Singapore and North Asia. Many countries are also setting aside funds and coming up with initiatives to prevent retrenchments, boost hiring and prepare workers for the eventual return of demand for skilled employees.

However, most countries are still in the early stages of recovery as different variants of Covid-19 continue to infect populations. Mass hiring volumes would still require more time and certainty before returning.

HRnetGroup’s expansion strategy seem to be to simply replicate their successful business model overseas in suitable cities. Their most recent branches are the opening of RecruitFirst in Jakarta, and HRnetOneWith in Shenzhen in 2020. Management has also shown a willingness to conduct M&A to drive growth overseas. This is evident from the acquisition of REForce and Centre Point Personnel in 2018.

With clear expansion plans, an asset-light and proven business model, strong cash generating ability, and a cash hoard of S$332.2m, HRnetGroup looks well-equipped to continue to perform in the future.

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