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DBS downgrades HRnetGroup, sharing similar concerns as CGS-CIMB's earlier call

The Edge Singapore
·1-min read

'Easing labour market in Singapore and sputtering growth in China a double whammy'

Andy Sim of DBS Group Research has downgraded his call on HRnetGroup from "buy" to "hold", citing concerns that a slowing economy will dampen the recruitment firm's business in its key markets of Singapore and China.

"Easing labour market in Singapore and sputtering growth in China a double whammy," writes Sim in his June 28 note.

The Singapore labour market continues to lose steam as reflected in job vacancies and changes in total employment.

China’s economic recovery was also below market expectations and the growth reflected in the recent figures is largely a result of base effects, he adds.

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HRnet, as a leading recruitment agency in the region, will see its businesses affected, amid  macroeconomic uncertainties, continued inflationary pressures and rising risks of a recession.

Sim has reduced his revenue and earnings estimates for the current FY2023 by 14% and 11% respectively, and for the coming FY2024 by 18% each.

Sim's revised target price of 86 cents, from $1.07 previously, is based on estimated ex-cash 10x FY2023 and FY2024 earnings, a lower valuation from 11.5x given earlier.

Sim's downgrade follows a similar June 23 report by CGS-CIMB's Kenneth Tan and Lim Siew Khee, who now deem the stock "hold", from "add", and with a new target price of 80 cents, from $1 previously.

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