HRnet 1H21 results: Still anti-fragile

HRnet reported great results for the first half of 2021.

HRnet’s revenue, gross profit and net profit reached a record high in the first half of 2021 because of a big jump in flexible staffing and professional recruitment revenue.

Source: HRnet 1H21 results presentation

Here are the key points for HRnet’s 1H21 results:

  1. Revenue was up 30% year on year to SGD275 million while net profit rose 71% year on year to SGD36 million.  These strong results were driven by a big jump in flexible staffing revenue and improving professional recruitment activity.
  2. Flexible staffing headcount rose 47% year on year to a record 17,123 contractors.
  3. Job placements increased 6% year on year to 3,760 permanent jobs.
  4. The healthcare and life sciences industry which include pharmaceutical, medical service and research companies was the largest contributor to HRnet revenue (26% of 1H21 revenue vs 15% in 1H20). I can’t confirm this but this jump may be driven by clinics and hospitals hiring temporary workers to staff vaccination centres.
  5. All three geographic segments (Singapore, North Asia and Rest of Asia) reported improved results with increased flexible staffing and professional recruitment activity in all segments.
  6. Operating cash flow fell 92% year on year to SGD4 million mainly because of a big increase in trade receivables. The outstanding amounts are said to be within credit terms so this is probably a temporary issue.
  7. HRnet continued investing in their digital platforms which includes Leaders Digital Club which organizes discussion sessions for clients, Launchpad, a content platform for candidates and EASE, a mobile app for flexible staffing employees.

HRnet expects the flexible staffing segment to continue growing because the global pandemic is unlikely to resolve in the next six months while a continued recovery in professional recruitment is dependent on Asian economies re-opening.

With a trailing 3% dividend yield, 13x PE and 6x EV/EBITDA multiple, HRnet is a fair company trading at a wonderful price. HRnet’s focus on the cash-intensive flexible staffing segment and their diversification across industries has been the right strategy during this pandemic  I’m feeling really happy about buying more shares earlier this year so I probably won’t be buying more this week.

1H21 results has shown that HRnet is a resilient company. HRnet earnings have grown in the midst of a global pandemic because of their flexible staffing segment. Recruitment activity for permanent jobs should recover once the global pandemic is finally over. If HRnet can continue growing despite competition from digital networks such as Linkedin and Glassdoor, the company may even transition from a deep value play into a compounder!  Lastly, HRnet also has a huge net cash position (SGD0.29 per share) to develop new digital capabilities or enter new markets.

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