HRnetGroup

[BlueKelah]

Growing rev and profits, strong mgmt/promoter, consistent high ROE, +ve free cash flows, good biz model of co-owner biz heads, diversified across geographies & brands

Even a conservative DCF value points to $1.1 or more.

What can go wrong with this biz?

Will their business be adversely affected by a big drop in Company hiring during the coming global recession? Better to buy it when the recession has caused things to bottom out?

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PeopleSearch Shanghai - HRnetGroup 30th Anniversary:

https://www.youtube.com/watch?v=zaG15_gy2IY

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PeopleSearch Japan - HRnetGroup 30th Anniversary:

https://www.youtube.com/watch?v=wdrFieijVik

[karlmarx]

Recruitment is an ever-green business and there will always be companies which outsource this to agencies. Recession comes and goes, so I think an investor should take this into account rather than discounting the business entirely.

Arguably, the biggest factor driving the earnings of a business is its leader, and maybe market is discounting this aspect of HRN.

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SIAS – HRnetGroup Limited Investor Day: 25 October 2022

https://youtu.be/Mt8CSJvHA44?t=4389

Interesting part on PEs offering 250 mil for 25% stake.

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HRnetGroup share buybacks seems become much more aggressive:

Nov 4 - 420,000 out of 428,900 volume
Nov 7 - 80,000 out of 82,600 volume
Nov 8 - 350,000 out of 376,000 volume

[weijian]

Interesting that Mgt actually gave such specific guidance in the AGM Q&A. I think the shareholder got more than asked for!

RESPONSES TO SHAREHOLDERS’ AGM QUESTIONS

Question: With the Bank failure (Credit Suisse collapse) and looming global recession as well as inflationary environment, how will these impact our operations in Asia?

Answer: The global recessionary sentiment has impacted our business across the region in Q1. We see some recovery in Q2 and that 1H performance is likely to be significantly lower than that of same time last year. However, 2H performance will have a good chance of stronger performance than 1H.

https://links.sgx.com/FileOpen/HRnetGrou...eID=755576

[weijian]

Interesting that Mgt actually gave such specific guidance in the AGM Q&A. I think the shareholder got more than asked for!

RESPONSES TO SHAREHOLDERS’ AGM QUESTIONS

Question: With the Bank failure (Credit Suisse collapse) and looming global recession as well as inflationary environment, how will these impact our operations in Asia?

Answer: The global recessionary sentiment has impacted our business across the region in Q1. We see some recovery in Q2 and that 1H performance is likely to be significantly lower than that of same time last year. However, 2H performance will have a good chance of stronger performance than 1H.

https://links.sgx.com/FileOpen/HRnetGrou...eID=755576

After giving more than asked for, shareholders continue to ask for more specific guidance during the AGM itself.

I understand that 2H performance in FY2023 is likely to surpass 1H. How about 2H in FY2023 vs FY2022?

On page 21 of the AR, the last sentence "We will keep fighting to do great work, and deliver yet another highly profitable year in 2023." Latest response to shareholder question, "1H performance is likely to be significantly lower than that of same time last year" 1. How significant is significant? more than 30% drop? 2. With this update, how confident are you to deliver another HIGHLY profitable year?

https://links.sgx.com/FileOpen/HGL_20230...eID=760332

[weijian]

There are always some decent questions from minorities for HRNet annual Q&A.

If we look at HRNet's end FY23 balance sheet (that has zero gearing), cash accounts for ~70% of equity and working capital is ~10% (net receivables/payables).

The company IPO-ed more than 6 years ago but ~25-30% of IPO proceeds remain "undeployed". If we were to look at its current cash profile, on hindsight, it didn't need the IPO cash for expansion as it could just organically grow from the earnings from this service based business.

The usage of IPO proceeds, where ~64mil was invested in taking minority stakes (<20% and so can't even account it as associate) in "synergistic" HR listed firms hasn't been encouraging as the market value has dropped ~80% since investment, but I do agree with HRNet BOD that it should not be paying out the cash as a one-time special dividend.

Responses to Questions from Shareholders Pursuant to the Annual Report of 2023 published on 9 April 2024

Question: . Is the group considering returning cash to shareholders through a one-time special dividend given the substantial cash balance currently?

Answer: No. We will continue with the current practice of declaring at least 50% of NPAT as dividend to shareholders on a bi-annual basis

https://links.sgx.com/FileOpen/HRnetGrou...eID=797441

[weijian]

HRnetGroup's equity investments are classified as FVOCI on the B/S, indicative of their "long term nature". But as of end FY23, it has lost ~80% of its initial value. Or in other words, those investments have to 4x just to recover to its original value - That is either doing a Nvidia since 2023, or replicating what the S&P500 has done-till-now since 2010.

The investment is probably more "wrong term" than "long term", and HRnetGroup should admit it and draw lessons from it. Strategic investments can be "synergistic" in terms of business value and "wrong" in terms of asset allocation, at the same time. They don't have to be mutually exclusive.

Minutes of the Annual General Meeting

Question 4 – “I wanted to understand equity losses that HRnet has consistently incurred from 2020 to 2023. In 2021, a profit was recorded for investment in Staffline. Unfortunately, the results does not seem to be that positive.

Company’s reply:
The Company treats this investment, particularly in Staffline, as long-term investments. Long-term investments require time to yield results, which is the approach the Company is taking.

https://links.sgx.com/FileOpen/HRnetGrou...eID=804605