• Keep BUY and SGD0.84 TP, 15% upside, c.5% FY24F yield. We continue to like HRnetGroup, as we anticipate economic recovery in Singapore and China. Our economist forecasts Singapore’s 2024 GDP growth to accelerate while maintaining strong GDP growth of 5% for China. The unemployment rate situation in Singapore turned slightly better in 4Q23 vs 3Q23, supporting our recovery thesis. Valuations are compelling, with forward P/E at -0.5SD of its historical mean and a dividend yield of 5%.

• 4Q23’s unemployment rate remained low. Based on the Ministry of Manpower’s (MoM) latest Monthly Unemployment Situation for 4Q23, overall unemployment rates in Dec 2023 remained low at 2% (resident: 2.8%, citizen: 2.9%). The citizen unemployment rate of 2.9% was slightly better than 3Q23’s 3%. The number of retrenchments declined to 3,460 for the quarter from 4,110 in 3Q23. Job vacancies to unemployed persons increased in 4Q23 to 1.74 from 1.64 in 3Q23 after consecutive quarters of decline. The recruitment rate inched up from 2.2 in 3Q23 to 2.3 in 4Q23.

• Expect better job demand in Singapore and China. Our economics desk estimates Singapore’s 2024 GDP growth at 2.5%, accelerating from 2023 – driven by an improving external environment. More robust global demand should drive domestic industries’ recovery and, eventually, the demand for labour, which will lend support to our earnings outlook. MoM, in its report, also indicated that labour demand is expected to strengthen on the back of improving GDP growth. Based on its research findings, 48% of firms surveyed in Dec 2023 had plans to hire over the next quarter, an increase from 42.8% in Sep 2023. In addition, 32.6% of firms intended to raise wages in the next three months, rising from the low of 18% in Sep 2023. For China, our economists see signs of continued economic recovery and have forecasted a 5% GDP growth for 2024. This should translate into higher job demand in 2024 as well.

• Maintain BUY. As overall unemployment is stable, we make no changes to our estimates and TP. Our TP pegs the stock at +0.5SD of the historical mean forward P/E. We continue to like HRNET for its: i) Cash-generative ability, ii) strong net cash balance sheet, iii) attractive dividend yield of c.5%, iv) undemanding valuation of c.12x forward P/E (at -1SD of its historical mean forward P/E), v) continued share buyback in support of EPS, and vi) as a beneficiary of the economic recovery going into FY24 – especially in Singapore and China.

• Key risk. Slower-than-expected recovery in the key labour markets of Singapore, China, and Taiwan.

• ESG. Based on HRNET’s 3.0 ESG score (below the country median of 3.1), we apply a 2% ESG discount to its intrinsic value to derive our TP.

Source: RHB Research - 4 Apr 2024