Broker: CGS International Securities Singapore Pte. Ltd.
Date of Report: August 14, 2025
HRnetGroup Limited: Navigating a Hiring Recovery with Attractive Dividends and ESG Leadership
Overview: Awaiting the Hiring Comeback
HRnetGroup Limited (HRNET), a leading professional recruitment and staffing company in Asia Pacific (excluding Japan), has delivered a surprisingly strong first half for 2025. The broker maintains a “Hold” rating with a revised target price of S\$0.70, reflecting upside potential but also industry headwinds. Investors are drawn to HRNET’s robust dividend yield of around 6%, disciplined cost management, and unique ESG initiatives.
1H25 Financial Performance: Government Grants Drive Outperformance
- 1H25 Profit After Tax and Minority Interests (PATMI): S\$28 million (+29% YoY), exceeding forecasts due to S\$9 million in government subsidies, which was S\$3 million higher than expected.
- Underlying Profit: Excluding grants, profit was S\$25 million, aligning with expectations.
- Revenue Growth: 3% YoY, driven solely by flexible staffing (FS) volume increases.
- Gross Profit Margin (GPM): Fell to 12% (-0.8% pt YoY), offsetting volume gains.
- Operating Profit: Down 14% YoY to S\$19 million, impacted by higher employee benefit expenses (+1.6% pts YoY).
- Dividend: Interim dividend of 2 Scts per share (70% payout ratio), translating to an annualized yield of approximately 6%.
Regional Trends: North Asia Shows Signs of Recovery
- China & Taiwan: Stronger GDP growth contributed to a 14% YoY increase in gross profit in Taipei, driven by e-commerce, semiconductors, and tech talent demand.
- China: Gross profit growth was muted, but revenue rose 12% YoY, supported by FS volume gains. China and Taiwan together accounted for nearly one-third of 1H25 gross profit.
- Senior Executive Search: Segment posted 19% YoY growth in 1H25, outperforming peers like Korn Ferry and Heidrick & Struggles (9% growth in the same category).
Strategic Focus: Flexible Staffing and High-Value Placements
HRNET continues to emphasize growth in flexible staffing and high-value professional recruitment, especially in executive search. Its deep client relationships and sector expertise are positioning the company for market share gains as hiring trends recover.
Financial Summary and Key Ratios
|
Dec-23A |
Dec-24A |
Dec-25F |
Dec-26F |
Dec-27F |
| Revenue (S\$m) |
578.5 |
567.0 |
576.9 |
593.9 |
608.6 |
| Operating EBITDA (S\$m) |
58.3 |
49.0 |
45.7 |
55.3 |
58.7 |
| Net Profit (S\$m) |
63.6 |
44.5 |
47.8 |
51.1 |
53.2 |
| Core EPS (S\$) |
0.054 |
0.047 |
0.043 |
0.047 |
0.050 |
| Core EPS Growth (%) |
(8.2) |
(11.5) |
(10.1) |
11.3 |
4.6 |
| FD Core P/E (x) |
13.36 |
15.10 |
16.80 |
15.09 |
14.43 |
| DPS (S\$) |
0.040 |
0.040 |
0.040 |
0.040 |
0.040 |
| Dividend Yield (%) |
5.59 |
5.59 |
5.59 |
5.59 |
5.59 |
| P/BV (x) |
1.87 |
1.85 |
1.82 |
1.77 |
1.72 |
| ROE (%) |
14.3 |
12.3 |
10.9 |
11.9 |
12.1 |
Segment Performance: Professional Recruitment vs Flexible Staffing
- Professional Recruitment: 1H25 revenue S\$27.7m (+5.6% HoH, -3.3% YoY), gross profit S\$27.6m (+5.4% HoH, -3.5% YoY), GPM stable at 99.7%.
- Flexible Staffing: 1H25 revenue S\$265.8m (+5.2% HoH, +4.1% YoY), gross profit S\$31.8m (+1.7% HoH, -2.8% YoY), GPM fell to 12.0% (-0.4% HoH, -0.9% YoY).
- Professional Recruitment continues to support high margins and strategic focus, while Flexible Staffing remains the primary growth driver by volume.
Peer Comparison: How HRnetGroup Stacks Up Globally
| Company |
Ticker |
Recommendation |
Price (lcl curr) |
Target Price |
Market Cap (US\$ m) |
Core P/E (CY25F) |
Core P/E (CY26F) |
EPS CAGR (3yr) |
P/BV (CY25F) |
ROE (CY25F) |
Dividend Yield (%) |
| HRnetGroup Limited |
HRNET SP |
Hold |
0.72 |
0.70 |
547 |
16.2 |
15.6 |
n.a. |
1.82 |
11.0% |
5.6% |
| Beijing Career International |
300662 CH |
NR |
31.32 |
n.a. |
859 |
22.0 |
18.0 |
19.5% |
3.13 |
10.9% |
0.5% |
| Humanica PCL |
HUMAN TB |
NR |
6.80 |
n.a. |
177 |
15.5 |
13.9 |
10.8% |
1.60 |
9.5% |
6.2% |
| JAC Recruitment Co Ltd |
2124 JP |
NR |
1,066 |
n.a. |
1,204 |
21.8 |
n.a. |
16.1% |
9.32 |
31.8% |
2.4% |
| Pasona Group Inc |
2168 JP |
NR |
2,146 |
n.a. |
589 |
n.a. |
n.a. |
n.a. |
0.59 |
35.9% |
3.5% |
| Persol Holdings Co Ltd |
2181 JP |
NR |
270.7 |
n.a. |
4,209 |
16.7 |
n.a. |
17.7% |
3.18 |
18.2% |
3.4% |
| Recruit Holdings Co Ltd |
6098 JP |
NR |
8,785 |
n.a. |
93,749 |
32.4 |
n.a. |
16.8% |
7.63 |
21.8% |
0.3% |
ESG Leadership: Commitment and Co-Ownership Scheme
- HRNET aligns with global sustainability standards, including SGX Core ESG Metrics, GRI Standards 2021, and IFRS Sustainability Disclosure Standards.
- Zero incidents of non-compliance with laws or regulations from FY18 to FY24, supporting its strong ESG track record.
- Innovative co-ownership scheme allows business unit leaders to buy stakes in subsidiaries they operate, driving productivity, cost control, and sustainable earnings.
- Annual CSR activities and a focus on non-discriminatory hiring and candidate employability enhance fair labor market development and reduce inequality.
Balance Sheet and Cash Flow Highlights
- Total cash and equivalents forecast to rise from S\$271.6 million in Dec-23A to S\$284.5 million by Dec-27F.
- Shareholders’ equity projected to grow from S\$376.6 million in Dec-23A to S\$409.6 million in Dec-27F.
- Net cash per share stable at S\$0.28-0.29; strong balance sheet supports ongoing dividends and growth initiatives.
- Free cash flow to equity expected to increase from S\$39.93 million in Dec-23A to S\$60.10 million in Dec-27F.
Key Ratios and Drivers
- Revenue growth to recover from -5.44% in Dec-23A to 2.48% in Dec-27F.
- Operating EBITDA margin stabilizes around 8-10% over the forecast period.
- Return on equity (ROE) expected to remain attractive at 10.9-12.1% through Dec-27F.
- Permanent placements to rebound in FY26F (+7%) and FY27F (+3%) following two years of declines.
- Contract employees to increase steadily (+5% in FY25F, +3% in FY26F, +2% in FY27F).
Risks and Opportunities
- Upside Risks: Recovery in executive hiring, strategic M&A activity.
- Downside Risks: Weakening macro conditions, impacting permanent placement volumes.
Valuation and Recommendation Framework
- Target price set at S\$0.70, based on 13x FY26F P/E, which is 0.5 standard deviations below HRNET’s FY17-24 historical mean.
- Current price: S\$0.715, offering limited upside (-2.1%).
- Consensus ratings: 1 Buy, 1 Hold.
- HRNET’s total return expected to be between 0% and +10% over the next 12 months (“Hold” rating).
Conclusion: HRnetGroup Positioned for Gradual Recovery and Sustainable Returns
HRnetGroup’s strong dividend yield, disciplined cost management, and unique co-ownership scheme make it a standout in the Asia Pacific recruitment sector. While macro headwinds persist, the company’s focus on flexible staffing, high-value placements, and ESG leadership position it well for long-term market share gains as hiring recovers. Investors should watch for further improvements in executive recruitment trends and strategic moves in the sector.
